MODULE
Principles of Marketing
BMK242
Micheal Mwewa
School of Business Studies
MULUNGUSHI UNIVERSITY
INSTITUTE OF DISTANCE EDUCATION
FOREWORD
This module has been developed in line with Mulungushi University policy of offering
distance and lifelong programmes for those people who are unable to attend full time
study. The module is interactive in nature through which lecturers communicate with
the distance students regarding how to proceed and complete the course.
The module is divided into chapters which provide an ordered series of detailed units.
These units provide detailed information required in the specified courses. In this
module the assessments of assignments and examinations are stipulated for
students to know what they are expected of.
This module is meant to assist the distance students to write their assignments and
be able to prepare for .examinations in the course of their study area. In other words,
it will operate as a guide to the distance students to be able to study on their own and
at their own pace.
Let this module guide the distance students as they develop their careers at
Mulungushi University. I hope that through this module the motto of this university
‘Pursuing the frontiers of Knowledge’ will be demonstrated by each distance
student and through good performance these students will become the ambassadors
of Mulungushi University locally and internationally.
Dr. Ernest M. Beele, PhD
Deputy Vice Chancellor
Copyright
All copyright reserved. No part of t his module may be reproduced , stored in
any retrieval system, transmitted in any form or by any means, electronic,
recording, mechanical, photocopying or otherwise, without prior permission in
writing from Mulungushi University.
Mulungushi University
Institute of Distance Education
Great North Road
P.o Box 08415
Kabwe
Zambia
Fax: +260 5 223750
Email: ide@mu.ac.zm
Website:http://www.mu.ac.zm
[Add address line 1]
Acknowledgements
The Institute of Distance Education of Mulungushi University wishes to thank the following for their
contributions to the development and production of this module.
Moulen Siame
Lecturer SBS
Patrick B. Lungu
Lecturer SBS
Stephen Chibangula
Lecturer SBS
Dr. John Simwinga
Editor
Estella Mulenda Chali
Editor
Allan Kasongo
Editor
Oakinah Mutinta Mweembe
IDE
Mutinta Mwananimbwe
IDE
Prof. Anne Sikwibele PhD
Institute of Distance Education
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Contents
Contents
About this module
1
How this module is structured .......................................................................................... 1
Course overview
3
Welcome to princples of marketing .................................................................................. 3
Marketing (is this course for you)? ................................................................................... 3
Course outcomes ............................................................................................................... 3
Timeframe ......................................................................................................................... 4
Study skills ........................................................................................................................ 4
Need help? ........................................................................................................................ 6
Assignments ...................................................................................................................... 7
Assessments ...................................................................................................................... 8
Getting around this module
Margin icons ..................................................................................................................... 9
Unit 1
8
[Overview of Marketing Concept ................................................................................... 10
Introduction ..........................................................Error! Bookmark not defined.0
Marketing involves products, Distribution, promotion, pricing and people……..11
Marketing focuses on goods? Service and Ideas…………………………………14
Core marketing concepts…………………………………………………………….....14
company orientation towards the market place………………………………………...15
Unit summiary ................................................................................................................ 20
Assignment ..................................................................................................................... 20
Assessment...................................................................................................................... 20
Unit 2
18
Marketing Environment ..................................................Error! Bookmark not defined.
Introduction ........................................................................................................... 18
Unit summary ..................................................................Error! Bookmark not defined.
Assignment ..................................................................................................................... 27
Assessment...................................................................................................................... 27
Unit 3
28
Marketing Research ....................................................................................................... 30
Introduction ........................................................................................................... 30
Why marketing research is important ..................3Error! Bookmark not defined.
The marketing research process ............................................................................ 32
Unit summary ................................................................................................................. 38
Assignment ..................................................................................................................... 38
Assessment...................................................................................................................... 38
Unit 4
37
Marketing information systems ...................................................................................... 39
Introduction ........................................................................................................... 39
Design implementing…….………………………………………………………42
Unit summary ................................................................................................................. 43
Assignment ..................................................................................................................... 43
Assessment...................................................................................................................... 43
Unit 5
37
Market strategy…………………………………………………………………………………...……45
Introduction…………………………………………………………………………………………….45
Unit summary ........................................................................................................................... 52
Assignment ............................................................................................................................... 52
Assessment..............................................................................................................................................52
Unit 6
37
Marketing segmentation, Targeting and positioning ...................................................... 54
Introduction ........................................................................................................... 54
Reasons for using market segmentation ................................................................ 56
Unit summary ................................................................................................................. 60
Assignment ..................................................................................................................... 60
Assessment.................................................................................................................... 642
Unit 7
37
Consumer and organisational buying behaviour ........................................................... 62
Introduction ........................................................................................................... 62
Cultural factors ...................................................................................................... 63
Social factors ......................................................................................................... 64
Unit summary ............................................................................................................... 741
Assignment ..................................................................................................................... 72
Assessment...................................................................................................................... 72
Unit 8
37
Product, Branding and decisions .................................................................................... 73
Introduction ........................................................................................................... 73
Business and industrial products ........................................................................... 75
product line and product mix…………………………………………….............76
iv
Contents
Unit summary ................................................................................................................. 88
Assignment ..................................................................................................................... 88
Assessment...................................................................................................................... 88
Unit 9
37
Marketing environment………………………………………………………………………………...90
Introduction…………………………………………………………………………………………….90
Unique characteristics of services……………………………………………………………………..91
The marketing mix for services ……………………………………………………………………….93
Unit summary………………………………………………………………………………………….96
Assignments…………………………………………………………………………………………...96
Assessments……………………………………………………………………………………………96
Unit 10
37
Place/Distribution……………………………………………………………………………………...97
Introduction…………………………………………………………………………………………….97
The nature of marketing channels and supply chain management…………………………………….98
Functions of marketing channels………………………………………………………………………98
Unit summary……………………………………………………………………………………..….106
Assignment…………………………………………………………………………………………...106
Assessment…………………………………………………………………………………………...106
Unit 11
37
Pricing decisions and strategies………………………………………………………………………107
Introduction…………………………………………………………………………………………..107
Organizational influence on pricing decisions………………………………………………………..108
Factors affecting pricing decisions………………………..………………………….………………109
Unit summary…………………………………………………………………………….…………..115
Assignment………………………………………………………………………………….………..115
Assessment…………………………………………………………………………..………………..115
Unit 12
37
Marketing communications……………………………………………………………….....116
Introduction…………………………………………………………………………………..……….116
An overview…………………………………………………………………………………..………116
How communication works………………………………………………………………….……….117
Diffusion and categories of adopters…………………………………………………………..……..121
Unit summary…………………………………………………………………………………..…….130
Assignment…………………………………………………………………………………..……….130
Assignment………………………………………………………………………….………..………131
About this Module
Marketing (principles of marketing) has been produced by
Mulungushi University. All modules produced by Mulungushi
University are structured in the same way, as outlined below.
How this module is structured
The course overview
The course overview gives you a general introduction to the
course. Information contained in the course overview will help you
determine:
 If the course is suitable for you.
 What you will already need to know.
 What you can expect from the course.
 How much time you will need to invest to complete the course.
The overview also provides guidance on:
 Study skills.
 Where to get help.
 Course assignments and assessments.
 Activity icons.
 Units.
We strongly recommend that you read the overview carefully
before starting your study.
The course content
The course is broken down into units. Each unit comprises:
 An introduction to the unit content.
 Unit outcomes.
 New terminology.
 Core content of the unit with a variety of learning activities.
 A unit summary.
 Assignments and/or assessments, as applicable.
1
About this Module
OVERVIEW OF MARKETING CONCEPT
Resources
For those interested in learning more on this subject, we provide
you with a list of additional resources at the end of this module:
these may be books, articles or web sites.
Your comments
After completing principles of marketing we would appreciate it if
you would take a few moments to give us your feedback on any
aspect of this course. Your feedback might include comments on:
 Course content and structure.
 Course reading materials and resources.
 Course assignments.
 Course assessments.
 Course duration.
 Course support (assigned tutors, technical help, etc.)
Your constructive feedback will help us to improve and enhance
this course.
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Course overview
Welcome to Principles of
Marketing
Principles of Marketing—is this
course for you?
This course is intended for the third year degree students.
Course outcomes
Upon completion of principles of marketing, you will be able to:
 Explain the marketing concept.
 Formulate, execute and control marketing plans
Outcomes
 Examine and use the marketing mix of product, price,
distribution and promotion
 Justify the extended marketing mix for the marketing of
services
 Identify reasons why companies enter the international market
Timeframe
[What is the expected duration of this course?]
[How much formal study time is required?]
How long?
[How much self-study time is expected/recommended?]
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Course overview
OVERVIEW OF MARKETING CONCEPT
Study skills
As an adult learner your approach to learning will be different to
that from your school days: you will choose what you want to
study, you will have professional and/or personal motivation for
doing so and you will most likely be fitting your study activities
around other professional or domestic responsibilities.
Essentially you will be taking control of your learning environment.
As a consequence, you will need to consider performance issues
related to time management, goal setting, stress management,
etc. Perhaps you will also need to reacquaint yourself in areas such
as essay planning, coping with exams and using the web as a
learning resource.
Your most significant considerations will be time and space i.e.
the time you dedicate to your learning and the environment in
which you engage in that learning.
We recommend that you take time now—before starting your
self-study—to familiarize yourself with these issues. There are a
number of excellent resources on the web. A few suggested links
are:
 http://www.how-to-study.com/
The “How to study” web site is dedicated to study skills
resources. You will find links to study preparation (a list of nine
essentials for a good study place), taking notes, strategies for
reading text books, using reference sources, test anxiety.
 http://www.ucc.vt.edu/stdysk/stdyhlp.html
This is the web site of the Virginia Tech, Division of Student
Affairs. You will find links to time scheduling (including a
“where does time go?” link), a study skill checklist, basic
concentration techniques, control of the study environment,
note taking, how to read essays for analysis, memory skills
(“remembering”).
 http://www.howtostudy.org/resources.php
Another “How to study” web site with useful links to time
management, efficient reading, questioning/listening/observing
skills, getting the most out of doing (“hands-on” learning),
memory building, tips for staying motivated, developing a
learning plan.
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The above links are our suggestions to start you on your way. At
the time of writing these web links were active. If you want to look
for more go to www.google.com and type “self-study basics”,
“self-study tips”, “self-study skills” or similar.
Need help?
Is there a course web site address?
Help
What is the course instructor's name? Where can s/he be located
(office location and hours, telephone/fax number, e-mail
address)?
Course instructor’s name is Mr Mwewa at Mulungushi University,
main campus, Great North Road, P.o Box 80415, Kabwe.
Is there a teaching assistant for routine enquiries? Where can s/he
be located (office location and hours, telephone/fax number, email address)?
Is there a librarian/research assistant available? Where can s/he
be located (office location and hours, telephone/fax number, email address)?
Is there a learners' resource centre? Where is it located? What are
the opening hours, telephone number, who is the resource centre
manager, what is the manager's e-mail address)?
Who do learners contact for technical issues (computer problems,
website access, etc.)
Dr Kunda, Institute of ICT education, Mulungushi University
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Course overview
OVERVIEW OF MARKETING CONCEPT
Assignments
[How many assignments are there for this course?]
3 assignments
[How are the assignments are to be submitted?]
Assignments
By post or handed in, in person
[To whom should the assignments be submitted?]
Director
Institute of Distance Education, P.o Box 80415, Kabwe
[What is the schedule for submitting assignments? End of each
unit? Specific dates?]
Dates indicated on the copy of the assignment.
[What is the order of the assignments? Must they be completed in
the order in which they are set?]
They should be submitted in the order in which they are given.
Assessments
How many assessments will there be in this course?
Self assessment questions are at the end of each unit
When will the assessments take place?
After each unit
How long will the assessments be?
2 hours
How long will learners be allowed to complete the assessment(s)?
No time limit but should be immediately a unit is completed.
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Getting around this module
Margin icons
While working through this module you will notice the frequent
use of margin icons. These icons serve to “signpost” a particular
piece of text, a new task or change in activity; they have been
included to help you to find your way around this module.
A complete icon set is shown below. We suggest that you
familiarize yourself with the icons and their meaning before
starting your study.
Activity
Assessment
Assignment
Case study
Discussion
Group activity
Help
Note it!
Outcomes
Reading
Reflection
Study skills
Summary
Terminology
Time
Tip
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Unit 1
OVERVIEW OF MARKETING CONCEPT
Unit 1
OVERVIEW OF MARKETING
CONCEPT
Introduction
Outcomes
This unit introduces you to the marketing concept and various terms
used in the field of marketing.
After completing this unit you will be able to




Define the concept of marketing
Evaluate the importance of marketing to civilization
Identify various marketing orientations
Explain core marketing concepts
[Term]:
[Term description]
[Term]:
[Term description]
Terminology
Adding extra rows to the
Table graphicRemoving
rows from the table graphic
Marketing is a term that is hardly understood by many. Most people
say marketing is selling; advertising or packaging. But marketing is a
term that encompasses many activities than most people realize.
According to Dibb et al because marketing is practiced and studied for
many different reasons marketing has been and continues to be
defined in many different ways, whether for academic , research or
applied business purposes.
Modern civilization is completely dependent on marketing. This module
has been prepared with materials from a variety of sources and the
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materials which include paper, pens, computer hardware and software
etc have been made available through marketing. These materials
were produced from different sources and were assembled through
various exchanges and other marketing activities. Think of all the good
things that you possess. All these have been made possible through
marketing. In a primitive society where marketing does not exist life is
very basic and difficult. This is because even essential services such as
education, health, agriculture etc are all dependent on marketing. In
terms of the production process marketing is at the very end of the
process. Let us now look at a number of definitions. Dibb, Simkin, Pride
and Ferrel define marketing as an endeavour that
-consists of individual and organizational activities that
expedite satisfying exchange relationships in a dynamic
environment through the creation, distribution, promotion
and pricing of goods and ideas.
As Dibb et al (opp cit) explain the basic rationale of marketing when you
look at the above definition is that to succeed, a business requires
satisfied and happy customers who return to the business to provide
custom. In exchange for something of value, typically payment or
donation, the customers receive a product or service that satisfies their
needs; accordingly marketers must constantly assess their customer’s
requirements and be prepared to modify their marketing activities
accordingly. Indeed an assessment of marketing opportunities is an
ever evolving process requiring regular revision and updating.
Here is how the Chartered Institute of Marketing defines the term:
Marketing is the management process
responsible for identifying, anticipating and satisfying
customer requirements profitably.
As Dibb et al put it “understanding customers and anticipating their
requirements is a core theme of effective marketing”. The implication
of this is that understanding general market trends and developments
that may affect both customer’s views and the activities of business
operating in a particular market require effort. According to US
management authority Peter Drucker marketing essentially depends on
the successful analysis of customers, the marketing environment,
competition and the business’s internal capabilities. Peter Drucker says
The aim of marketing is to make selling superfluous. The aim is to know
and to understand the customer so well that the product or
service fits him/her and sells itself.
If you thought marketing was selling then in light of the preceding
understanding of marketing then you need to reconsider your position.
The meaning of Drucker’s characterization of marketing is that by
clearly identifying customer needs and producing quality products, the
product will sell itself thereby relieving the organization of a lot of
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Unit 1
OVERVIEW OF MARKETING CONCEPT
energies that would go into selling. Let us now look at another
marketing authority, Philip Kotler (2006) According to Kotler:
The marketing concept holds that the key to achieving
organizational goals lie in determining the needs and
wants of target markets and achieving the desired
satisfaction more efficiently and effectively than
competitive.
The working definition in this module is the definition by the Chartered
Institute of marketing which states that
Marketing is the management process responsible for
identifying, anticipating and satisfying customer
requirements profitably.
The Definition Explored
Marketing being a management process means that the endeavour is
not undertaken as a haphazed process. It is a systematic process.
Identifying customer requirements is done through marketing research
to establish exactly what customer requirements are. To anticipate
customer requirements means understanding that customer
requirements are not static. These requirements or need and wants
keep on changing as the environment evolves. Thus markers need to
continuously watch the changing environmental forces to observe seen
how they bring about changes in fashions, tests, views, opinions. If
these can be anticipated then the marketer will be able to keep up to
date with people’s requirement and be able to meet these. Satisfying
customer requirements profitably simply means that care need to be
exercised not to satisfy customers at a loss. The organization need to
earn a profit.
Let us return briefly to the theme raised at the beginning of this unit –
exchange. This concept is central to marketing. Marketing facilities
satisfy exchange relationship; for exchange to take place, four
conditions must exits.
(1) Two or more individuals, groups or organizations must
participate;
(2) Each party must possess something of value that the other party
desires
(3) Each party must be willing to give up its “something” of value to
receive the ‘something of value’ held by the other party. The
objective of marketing exchange is to receive something that is
desired more than that which is given up.
That is a reward in excess of costs.
(4) The parties to the exchange must be able to communicate with
each other to make
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their ‘something’ of value available.
The “something of value” held by the two parties are most often
products and/or financial resources such as money or credit. When an
exchange occurs, products are traded for other products or financial
resources.
Infact the exchange should be satisfying to both the buyer and seller.
Infact. In the study of marketing managers, “32% indicated that creating
customer satisfaction was the most important concept in defining
marketing. Marketing activities should be oriented towards creating
and maintaining satisfying exchange relationships. To maintain an
exchange relationship, the buyer must be satisfied with the goods,
service or idea obtained in the exchange; the seller must be satisfied
with the financial reward or something else of value received in the
exchange. (Dibb et al opp cit)
MARKETING INVOLVES PRODUCTS, DISTRIBUTION, PROMOTION,
PRICING AND PEOPLE
Marketing means more than simply advertising or selling a product. It
involves developing a product that will satisfy certain needs. It focuses
on making the product available at the right place, at the right time, at
price that is acceptable to customers and with the right people and
service support. It also requires transmitting the kind or promotional
information that will help customers determine whether the products
will infact be able to satisfy their needs.
MARKETING FOCUSES ON GOODS? SERVICE AND IDEAS
Dibb and her colleagues further explain that a product is viewed as
being a good, service or idea. A good is a physical entity that can be
touched. Acal effort to people or objects in order to provide intangible
benefit to customers. Services such as air travel, dry-cleaning,
hairdressing, banking, medical care and childcare are just as real as
goods An individual cannot actually touch or stock them. Ideas are
concepts, philosophies, images and issues. For example, a marriage
counsellor gives couples ideas and advice to help improve their
relationship. Other marketers of ideas include political parties,
charities, religious groups, schools.
CORE MARKETING CONCEPTS
To better understand the marketing function you need to acquaint
yourself with the following core set of concepts.
Needs, Wants and Demands
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Unit 1
OVERVIEW OF MARKETING CONCEPT
Needs are the basic human requirements. Requirements that are basic
to existence such as food, shelter, water etc. These needs according to
Kotler & Keller (2009) become wants when they are directed to specific
objects that might satisfy the needs. Wants are shaped by society. A
person’s need for food might be satisfied by a boiled cob of maize- thus
a cob of maize in this case is a want, a person’s need for food in the US
can be satisfied by french fries and a soft drink. This is also a want.
From this you can see that while needs are basic human requirements
wants are needs as shaped by society. Remember needs and wants are
the customer requirements which marketers seek to satisfy.
Demands
Demands are wants for specific products backed by ability to pay. In
marketing we are not concerned with mere wants. We are concerned
with wants that are backed by ability to pay. These wants that are
backed by ability to pay are what constitutes demands in marketing.
Value and satisfaction
Value is the reflection of perceived tangible and intangible benefits and
costs to the customer. Value is central to the marketing concepts. As
Kotler & Keller puts it “We can think of marketing as the identification,
creation, communication, delivery and monitoring of customers value”.
Satisfaction reflects a person’s judgments of a product’s perceived
performance (or outcome in relationship to expectation). If the
performance falls short of expectations, the customer is dissatisfied and
disappointed. If it matches expectations, the customer is satisfied. If it
exceeds, then the customer is delighted.
(1) Marketing Channels
To reach a target market, the marketer uses three kinds of channels.
Communication channels deliver and receive messages from target
buyers and include newspapers, magazines, radio, television, mail,
telephone, bill boards, CDs, audio tapes and the internet. Beyond these,
just as we convey messages by our facial expression and clothing, firms
communicate through the look of their retail stores, the appearance of
the websites and many other media. Marketers are increasingly adding
dialogue channels such as e-mail, blogs and toll-free numbers.
(2) Distribution Channels
To display, sell or deliver the physical product or service(s), to the buyer
or user. These include distributors, wholesalers, retailers and agents.
The marketers also use service channels to carry out transactions with
potential buyers. Service channels include warehouses, transportation
companies, banks, insurance companies that facilitate transportations.
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(3) Competition
Competition includes all the actual and potential rival offerings and
substitutes a buyer might consider.
COMPANY ORIENTATION TOWARDS THE MARKET PLACE
Just like individuals have different orientation towards life companies
also have different orientations towards the marketplace. The
orientation constitutes a philosophy that guides the organization’s
marketing. The various orientations are the production concept, the
product concept, the selling concept and the marketing concept and the
holistic marketing concept let us consider each of these orientations in
turn:
Production Concept
This is one of the oldest concepts in business. It holds that consumers
will prefer products that are inexpensive and widely available.
Managers of production oriented business concentrate on achieving
high production efficiency, low costs, and mass distribution. Marketing
also use the production concept when a company wants to expand its
market.
Product Concept
The product concept holds that consumers favour products that offer
the most quality, performance, or innovative features. Managers in
these organizations focus on making superior products and improving
them over time. However, these managers are sometimes caught up in
a love affair with their products. Theodore Levitt, a marketing authority
has said companies which believe in the product concept end up with
marketing myopia that is they fail to see beyond the product in
question. Thus they continue to improve and market a product that has
lost favour in the market. For example a company might continue to
improve a typewriter when clearly people are no longer interested
typewriters.
Selling Concept
The selling concept holds that consumers if left alone won’t buy enough
of the organization’s products the firm must therefore undertake an
aggressive selling and promotion effort. Such companies invest a lot of
resources in advertising and retaining large sales forces.
The selling concept is practiced more aggressively with unsought goods
that buyers normally do not think of buying such as Insurance,
encyclopaedias and cemetery plots. Most firms also practice the selling
concept when they have overcapacity. Their aim is to sell what they
make, rather than what the market wants. It assumes that customers
who are coaxed into buying a product will like it and that if they do not
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Unit 1
OVERVIEW OF MARKETING CONCEPT
like it, they may not only want to return or bad-mouth it or complain to
consumer organizations but they might even buy it again. You can see
here that quality might be compromised in the quest to sell more and
more.
Marketing Concept
The marketing concept emerged in the mid 1950s. Instead of a product
centred make and sell philosophy, business shifted to a customercentered, “sense and respond philosophy. The job is not to find the
right customers for your products but to find the right products for your
customers. The marketing concept holds that the key to achieving
organizational goals is being more effective than competitors in
creating, delivering and communicating superior customer value to your
chosen markets.
The marketing concept’s main focus is on the customer. The customer
is King/Queen and companies who are guided by the marketing concept
put the customer at the centre of all their marketing activities. These
companies are never satisfied with whatever they are doing until the
customer is satisfied. The contrast Theodore Levitt of Harvard drew
between selling and marketing concepts is very illuminating in this
regard. He observed:
Selling focuses on the needs of the seller; marketing on the needs of the
buyer. Selling is preoccupied with the seller’s need to convert his
product into cash; marketing with the idea of satisfying the needs
of customer by means of the product and the whole cluster of things
associated with creating delivery and finally consuming it.
Several scholars have found that companies that embrace the
marketing concept achieve superior performance.
The Holistic Marketing Concept
This concept supercedes all the above concepts. In the view of Kotler
and Keller the trends and forces found in the 21st century are leading
business firms to a new set of beliefs and practices. The best marketers
recognize the need to have a more complete, cohesive approach that
goes beyond traditional applications of the marketing concept.
The holistic marketing concept is based on the development, design,
and implementation of marketing programmes, processes and activities
that recognize their breadth and interdependencies. Holistic marketing
concept recognizes that “everything matters” in marketing and that a
broad integrated perspective is often necessary’.
Holistic marketing is thus an approach that attempts to recognize and
reconcile the people and complexities of marketing activities. The four
broad components of holistic marketing are relationship marketing,
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integrated marketing, internal marketing and performance marketing.
(Adapted from Kotler and Keller, 2009)
Let us look at each of the components of holistic marketing concept.
Relationship Marketing
In the 21st century as Kotler and Keller observe increasingly, a key goal
of marketing is to develop deep, enduring relationships with people and
organizations that could directly or indirectly affect the success of the
firms marketing activities. Relationship marketing aims to build
mutually satisfying long term relationships with key constituents in
order to earn and retain their business.
The last constituents for marketing as customers (channels, suppliers,
distributors, dealers, agencies) and members of the financial
communities (shareholders, investors etc) Marketers if they are to
succeed must respect the need to create prosperity among all these
constituents and to develop policies and strategies to give returns to all
these key stakeholders.
According to Kotler and Keller the ultimate outcome of relationship
marketing is a unique company asset called a marketing network. A
marketing network consists of the company and its supporting
stakeholders customers, employees, suppliers, distributors, retailers,
advertising agencies, university scientists with whom it has built
mutually profitable business relationships. The operating principle is
build an effective network of relationship with key stakeholders and
profit will follow.
Integrated Marketing
The marketer’s aim is to devise marketing activities and assemble fully
integrated marketing programmes to create, communicate and deliver
value for customers. There are several activities that need integration.
Mc Cathy classified these activities as the marketing mix tools of four
broad kinds which he referred to as four Ps of marketing; product, price,
place and promotion.
diagram
Integrated marketing means that each of these elements should never
be treated separately. They should be considered together and should
be fully integrated re-enforcing each other. They should be a complete
blend.
Internal Marketing
Holistic marketing incorporates internal marketing, ensuring that
everyone in the organization embraces appropriate marketing principles
especially management regardless of their professions. Internal
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Unit 1
OVERVIEW OF MARKETING CONCEPT
marketing has the aim of employing, training and motivating able
employees who want to serve customers well. As the saying goes
charity begins at home. Thus serious marketers recognize that
marketing activities within the company can be even more important
than marketing activities directed outside the company.
Performance Marketing
Performance marketing is an aspect of holistic marketing. Performance
marketing requires understanding the returns to the business from
marketing activities and programmes, as well as addressing broader
concerns and their legal, ethical, social and environment effects. Top
management go beyond sales revenue to examine the scorecard and
interpret what is happening to market share, customer loss rate,
customer satisfaction, product quality and other measures.
16
Unit summary
In this unit you learned

This unit introduced the marketing concept and highlighted
the importance of marketing to modern civilization.

It explained core concepts in marketing. (you need to
revise these core concepts

It explained various marketing orientation that……………….a
company’s marketing.
Summary
Assignment
There is no assessment at this stage.
Assignment
Assessment
Assessment
1.
2.
3.
4.
5.
Questions
in your own words define the concept of marketing
Explain what you understand by needs, wants and
demands
Explain at least each of the 5 marketing orientations.
Compare and contrast the marketing concept and the
holistic marketing concept
Explain the components of the holistic marketing concept
17
18
UNIT 2
Marketing Environment
UNIT 2
Marketing Environment
Introduction
Upon completion of this unit you will be able to:
Outcomes
Terminology
18




Explain the environment in which marketing is undertaken
Explain the microenvironment
Assess the macro environment
Identify various republics marketers need to watch
As Armstrong and Keller (2008) point out marketers need to be good at
building relationships with customers, other stakeholders in the
company and external partners. To do this effectively, however, they
must understand the major environmental forces of actors that surround
all these relationships. A company’s marketing environment comprises
of actors and forces outside marketing that affect marketing
management’s ability to build and maintain successful relationships with
target customers.
Marketers have two special aptitudes as regards trucking and seeking
opportunities. They use marketing research and marketing intelligence
for collecting information about the marketing environment. By
carefully studying the environment, marketers can adapt their strategies
to meet new market place challenges and opportunities.
The marketing environment is made up of a microenvironment and a
macro environment. The microenvironment can be defined as forces
consisting of actors close to the company that affect its ability to serve
its customers. These are the top management, suppliers, marketing
intermediaries, customers, competitors and publics. The macro
environment comprises larger societal forces that affect the
microenvironment - demographic economic, natural technological,
political and cultural forces. We examine the microenvironment first.
For a company to succeed in building relationships by creating
customers value and satisfaction needs to build relationships with the
other companies, suppliers, marketing intermediaries, customers,
competitors and various publics which all combine to make up the
company’s value delivery network.
The company
When coming up with marketing plans, the marketing manager needs to
take other groups within the company into account such as: Top
management, Finance Department, Research and Development (RD),
Purchasing Department, production or Operations Department. All these
interrelated groupings constitute the internal environment.
The top management sets the company’s vision, objectives, broad
strategies and policies. marketing managers make decisions within the
strategies and plans made by Top Management. Other departments do
have an impact on the marketing departments’ plans and actions. Indeed
under the marketing concept all of these functions must put the
consumer at the centre of everything they do; “they should think
consumer”. They should work in harmony to provide superior customer
value.
1. Suppliers
As Armstrong and Keller explain that suppliers are an important link in
the company’s overall customer value delivery system. They provide the
resources or materials needed by the company to produce its goods and
services. Suppliers can seriously affect marketing. Marketing managers
must watch supply availability, supply shortages or delays; labour
strikes etc can cost sales in the short run and damage customer
satisfaction in the long-run.
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UNIT 2
Introduction
Marketers also monitor the price trends of their key inputs because
rising costs of inputs may force price increases that can make a
company’s products uncompetitive in t he market. Marketers today
treat their suppliers as partners in creating and delivering value to
customers.
2. Marketing intermediaries
Marketing intermediaries are firms that help the company to
promote, sell and distribute its goods to final buyers (Armstrong and
Keller). These include resellers, physical distribution firms,
marketing services agencies and financial intermediaries. Resellers
are distribution channel firms that help the company find customers
or make sales to them. These include wholesalers and retailers who
buy and resell merchandise.
3. Physical distribution firms
These help the company to stock and move goods from their points
of origin to their destinations. Working with warehousing and
transportation firms a company must determine the best way to store
and ship goods, balancing factors such as cost, delivery, speed and
safety.
4. Marketing services agencies
These are the marketing research firms, advertising agencies, media
firms and marketing consulting firms that help the company target
and promote its products to the right markets.
5. Finance intermediaries – include Banks, credit companies,
Insurance companies and other similar business that help finance
transactions or insure against the risks associated with the buying
and selling of goods.
6. Customers
The company needs to study five types of customer markets
closely:Customer markets, Business markets, Reseller markets, Government
markets and International markets.
7. Competitors
The marketing concept as we have observed states that to be
successful a company must provide greater customer value and
satisfaction than its competitors do. Thus, marketers must do more
than simply adapt to the needs of target consumers. They must also
gain strategic advantage by positioning their offering strongly
against competitors’ offerings in the minds of consumers.
20
8. Publics
These can be defined as any group that has an actual or potential interest in
or impact on an organization’s ability to achieve its objectives. Seven types
of publics can be identified.
 Financial publics
Influence the funds; - Banks, Investment houses, shareholders are
major financial publics.
 Media publics
Carry news, features and editorial opinion. They include
newspapers, magazines, radio and T.V stations.
 Government publics
Management must take Government developments into account
 Citizen – Action publics
A company’s marketing decisions may be questioned by
consumer organizations environmental groups. Its public
relations department can help it stay in touch with consumers and
citizen groups.
 Local publics
Include neighborhood and community organizations. Large
companies usually employ community relations officer to deal
with the community, attend meetings, answer questions and
contribute to worthwhile causes.
 General public
A company needs to be concerned about the general public’s
attitude towards its products and activities. The public image of
the company matters.
 Internal publics
Include workers, Managers the Board of Directors. Large
companies use newspapers and other means to inform and
motivate their internal publics. When employees feel good about
the company this positive attitude spills over to external publics.
The Firm’s Macro environment
The firm and all of the other players operate in a larger macroenvironment
forces that shape opportunities and pose threats to the firm. There are six major
environmental forces:
(1) Demographic Environment
Demography can be defined as “The study of human populations
in terms of size, density, location, age, gender, race, occupation
and other statistics” (Armstrong & Keller). The demographic
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UNIT 2
Introduction
environment is of major interest to marketers because it involves
people and people make up markets. The world’s large and
highly diverse population poses both opportunities and
challenges. Changes in demographic environment have major
implications for business.
(2) Economic Environment
These are factors that affect consumer buying power and
spending patterns. Nations vary greatly in their levels and
distribution of income. Some countries have subsistence
economics (like most in Africa) they consume most of their own
agricultural and individual output. These countries offer few
market opportunities. At the other extreme are industrial
economics, which constitute rich markets for different kinds of
goods and services. Marketers must pay close attention to major
trends and consumer spending patterns both within the country
and across the world.
-
Changes in Income
When there is a boom in the economy such as when copper prices
were very high at independence in 1964 up to the 1970 Zambia
consumers fell into a consumption frenz. They bought and
bought. The early 70s were affected by declining copper prices
and soaring oil prices. Consumers reduced their expenditure on
goods and services. Marketing of goods got affected badly.
-
Changing in consumer sending patterns
Food, housing and transportation use the most household income.
However consumers at different income levels have different
spending patterns. As family income rises, the percentage spent
on food declines, the percentage spent on housing remains about
constant (except for utilities such as electricity and public
services which decrease) and both the percentage spent on most
other categories and that devoted to savings increase.
-
It is a fact that changes in major economic variables such as income,
cost of living, interest rates and savings and borrowing patterns have a
large impact on the market place. Companies watch there variables by
using economic forecasting. Business do not have to be wiped out by
an economic downturn or caught short in the boom. Indeed with
adequate warming, they can take advantage of changes in the
economic environment.
(3) Natural Environment
Armstrong & Keller define the natural environment as Natural
Resources that are needed as inputs by marketers or that are
affected by marketing activities. Environmental concerns have
22
grown steady during the past three decades. In cities around the
world, air and water pollution have reached dangerous levels.
World concern continues to mount about the possibilities of
global warming.
Marketers as the two authors observe should be aware of several
trends in the natural environment. The first involves growing
shortage of raw materials. Air and water may seem to be infinite
resources, but groups see long term dangers. Air pollution chokes
many of the world’s large cities and water shortages are already a
big problem in some parts of the world. According to authority by
2030 more than one in three of the world’s human beings will not
have enough water to drink. Renewable resources, such as oil,
coal and various minerals pose a serious problem. Firms making
products that require these scarce resources face large cost
increases even if the materials do remain available.
A second environmental trend is increasing pollution. Industry
will almost always damage the quality of the natural
environment. Armstrong & Keller invite us to consider the
disposal of chemical and nuclear wastes; the dangerous mercury
levels in the ocean; the quality of chemical pollutants in the soil
and food supply; and the littering of the environment with plastics
and other packaging materials.
A third trend is increased Government intervention in natural
resource management. The governments of different vary in their
concern and efforts to promote a clean environment. Some
countries such as Germany vigorously pursue environmental
quality, others, especially many pooper nations do little about
pollution due to lack of resources. Given rich nations have
problems in having the huge resources required to mount a worldwide environmental effort. The general hope is that firms around
the world will accept more social responsibility and that less
expensive devices can be found to control and reduce pollution.
Concern for natural environment has spawned various green
movements today; enlightened firms go beyond what government
regulations dictate. They are developing environmentally
sustainable strategies and practices in an effort to create a world
economy that our planet can support indefinitely. They are
responding to consumer demands with more environmentally
responsible products.
Some firms are developing recyclable or brodegradable
packaging, recycled materials and components, better pollution
controls and move energy-efficient operations.
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UNIT 2
Introduction
Given the foregoing firms today are looking to do more than just
good deeds. More and more they are recognizing the link
between a healthy ecology and a healthy economy.
(4) Technological Environment
Armstrong & Keller define technological environment as forces
that create new technologies, creating new product and market
opportunities. According to the two authors technology is perhaps
the most dramatic force now shaping our destiny. Technology has
released such wonders as antibiotics, laptop computers and the
internet. It has also released horrors as nuclear missiles, chemical
weapons and assault raffles. It has released such mixed blessings
as the car, television and credit cards.
New technological create new markets and opportunities
(5) Political environment
Political environment can be defined as Laws, Government
agencies and pressure groups that influence and limit various
organizations and individuals in a given society.
-
Legislation Regarding Business
Given the most liberal advocates of free market economies agree
that the system works best with at least some regulation. Well
concerned regulation can encourage competition and ensure fair
markets for goods and services. Therefore Governments develop
public policy to guide commerce-sets of Laws and regulations
that limit business for the good of society as a whole. Almost
every marketing activity is subject to a wide range of Laws and
Regulations.
Business legislation has been enacted for a number of reasons.
The first is to protect companies from each other. Although
business executives may praise competition, they sometimes try
to neutralize it when it threatens to define and prevent unfair
competition.
In Zambia such laws are enforced by the competition commission
environment council of Zambia, PACRO and the Ministry of
Commerce and Industry.
The second purpose of government regulation is to protect
consumers from unfair business practices. Some firms left alone
would make shoddy products, invade consumer privacy, tell lies
in their advertising, and deceive consumers through packaging
and pricing.
24
The third purpose of Government regulation is to protect the
interest of society against unrestrained business behavior.
Profitable business activity does not always create a better quality
of life. Regulation arises to ensure that firms take responsibility
for the social costs of their production or products.
-
Increased emphasis on ethics and socially responsible actions
Written regulations cannot possibly cover all potential marketing
abuses and existing laws re often difficult to enforce. This beyond
written laws and regulations, business is also governed by social
codes and rules of professional ethics.
-
Socially responsible behavior
Enlightened companies encourage their managers to look beyond
what the regulatory system allows and simply “do the right
thing”. These socially responsible firms actively seek to pay
protect the term interests of their customers.
(6) Cultural environment
Cultural environment is defined as “Institutions and other forces
that affect society’s basic values, perception, preferences and
behaviors. Here are cultural characteristics that can affect
decision making in marketing.
-
Persistence of cultural values
People in a given society hold many beliefs and values. Their
core values and beliefs have a high degree of persistence, for
example among some ethnic groups in Zambia there is a strong
belief in polygamy and having many children. These beliefs
shape specific attitudes and behavior in everyday life. Core
beliefs are passed on from generation to generation.
Although core values persist changes to take place. Marketers
want to predict cultural shifts in order to spot new opportunities
and threats.
The major cultural values of society are expressed in people’s
views of themselves and others as well as their views of
organizations, society nature and the universe.
-
People’s views of themselves
People use products brands and services as a means of self
expression and they but products that match their view of
themselves. Marketers can target their products and services
based on such self views.
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UNIT 2
Introduction
-
People’s views of others
In recent decades it has been observed that people’s attitude
towards others have shifted. People want to be home and might
even be comfortable working from home. This trend suggests a
greater demand for home improvement and home office and
home entertainment.
-
People’s views of organizations
Corporate scandals and corporate downsizing leading to mass
layoffs etc. have undermined people’s confidence in
organizations.
According to Armstrong and Keller many people today see work
in organization as a core that enables them to earn money with
which to enjoy non-work hours. The trend suggests that
organizations need to find new ways to win consumers and
employee confidence.
-
People’s view of society
Armstrong and Keller argue that people vary in their attitude
towards their society. Patriots defend it, reformer want to change
it, malcontents want to leave it. Let us take patriots; companies
can promote products with patriotic themes. During Kaunda are
in Zambia the wearing of safari suits was encouraged and
clothing manufacturers responded accordingly. Similarly the
popularity of soccer in Zambia has had a good response from
marketers, marketing wide range of clothing and vuvuzelas.
-
Responding to environmental forces
In responding to environmental forces Dibb et al observe that
marketing managers can take two general approaches accept
environmental forces as uncontrollable or confront and mould
them.
If environmental forces are viewed as uncontrollable, the
organization remains positive and reacts to the environment.
Instead of trying to influence forces in the environment its
marketing managers tend to adjust current marketing strategies to
environmental changes. On the other hand, marketing managers
who believe that environmental forces can be shaped adapt a
proactive approach.
26
Unit summary
Summary
Assignment
Assignment
Assessment
Self Assessment Questions
Assessment
1. Explain why it is important for a firm to continuously
scan the marketing environment
2. Identify the elements in the microenvironment of the
firm
3. Identify the elements of a company’s macroenvironment
4. Explain the natural environment of a firm
5. Explain the social and cultural environment of a firm
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28
UNIT 3
Marketing Research
UNIT 3
Marketing Research
Introduction
This unit equips you with knowledge on handling Marketing Research
Objectives
Outcomes
Upon completing this unit you will be able to



Identify the importance of marketing research
Explain the marketing research process
Identify sources of data
Terminology
[Term]:
[Term]:
28
To implement marketing need information about the characteristics,
needs and desire of the target market customers (Dibb et al 2006) when
used effectively such information facilitates the relationship with
customers, by helping business to focus their efforts on meeting and even
anticipating, the needs of their customers.
WHY MARKETING RESEARCH IS IMPORTANT
Building and understanding of customers, competitors, market trends and
the marketing environment requires marketers to have access to
information and marketing intelligence. Sometimes marketing managers
find that the information available is inadequate and so marketing
research may provide additional information.
Marketing research is defined by the market research society (UK) as a
collection and analysis of data from a sample of individuals or
organizations relating to their characteristics, behavior, attitudes, opinions
or possessions. It includes all forms of marketing and social research such
as consumer and industrial surveys, psychological investigations,
observational and panel studies.
The purpose of marketing research is to provide information about
customers’ needs and marketing opportunities for particular goods and
services and the changing attitudes and purchasing patterns of customers.
Marketing research helps a company in marketing planning as it facilitates
the assessment of opportunities and threats. With marketing research a
company can better understand market opportunities, ascertain the
potential for success of new products. With market research a company
determines the feasibility of a particular marketing strategy.
Marketing intelligence is the systematic collection and analysis of publicly
available information about customers, competitors and developments in
the market place.
The goal of marketing intelligence is to improve strategic decision making
by understanding the consumer environment, assessing and tracking
competitor’s actions and providing early warning of opportunities and
threats.
Many companies send out teams of trained observers to mix and mingle
with customers as they use and talk about the company’s products. Some
companies routinely use consumers on – line chatting.
Competitor’s intelligence can be collected from people inside the
company such as engineers, scientists, purchasing personnel and sales
people. Suppliers, resellers and key customers are other sources.
Observing competitors and monitoring their published information can
yield usable information.
A company can analyze competitors’ products, monitor their sales, check
for patents and physical evidence.
Some companies sift through competitors’ garbage in search of
information. Competitors often reveal intelligence through their annual
reports, business publications, and trade shows exhibitions press release,
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UNIT 3
Marketing Research
Online database are also available to keen intelligence seekers.
The question of ethnics.
The growing use of marketing intelligence raises a number of ethnical
issues. Although most of the above techniques are legal some may involve
questionable practices.
MARKETING RESEARCH
In addition to marketing intelligence, information about general
consumer, competitors and market place happenings, marketers would
need formal studies that provide customer market place happenings and
market insights for specific marketing situations and decisions (Armstrong
and Kotler). Marketing intelligence cannot provide the detailed
information required. That being the case marketers will have to rely on
marketing research. The two authors define marketing research as:
The system design, collection, analysis and reporting of data relevant to
specific marketing situations facing an organization.
THE MARKETING RESEARCH PROCESS
To obtain accurate information, marketers approach marketing research
in logical steps as follows:
1.
2.
3.
4.
5.
Defining the problems
Designing the research plan
Collecting data
Analyzing and Interpreting research findings
Reporting research findings
Let us consider each of these steps.
Step 1. Defining the problem and research objectives
Marketing managers and researchers must work together to define the
problem and agree on research objective. While the Managers understand
the problem for which information is needed the researcher understand
research and how to obtain information?
Having defined the problem carefully the Managers and the researcher
must then set research objectives. The decision makers should remain in
the problem definition stage until they have determined clearly what they
want from the research and how they will use the findings. Deciding how
to refine a broad, indefinite problem into a clearly defined and
researchable statement is a prerequisite for the next step in planning; the
research design.
30
Step 2: Once the problem has been defined. The next step is research
design which is an overall plan for obtaining the information required to
address it. This step requires detailed research objective or hypothesis to
be formulated and the most appropriate type of research to be designed
to ensure that the results are reliable and valid.
Developing research objectives and hypothesis. A clear statement of
research objectives plays an important part in guiding a research project.
A research objective is the desired outcome from the marketing research
project being undertaken. Sometimes researchers develop hypothesis that
may be drawn both from previous research and expected research
findings. A hypothesis can be defined as an informed guess or assumption
about a certain problem or set of circumstances. It is based on all the
insight and knowledge available about a problem from previous research
studies and other sources. As information is gathered a researcher can
determine the hypothesis.
Stage 3: Collect the information
Data can be collected from either primary or secondary data sources.
(a) Secondary data is data collected for another purpose not
specifically related to the proposed research, for instance all the
internal information in the company marketing information
systems and databases, or information such as published research
reports, government information, newspapers and trade journals
and so on.
(b) Primary data is information collected specifically for the study,
under consideration. Primary data may be quantitative (statistics),
qualitative (attitudes etc) or observational videos of people
browsing in a store, for instance (Adapted from BPP, Marketing
Research, information 2005-2006).
Stage 4: Analysing and interpreting Research findings
At this stage data is fed into the computer to put it in an analysable form
to come up with statistics in case of quantitative data and summaries for
qualitative data to establish what the data reveals.
Stage 5: Reporting research findings
The final step in the marketing research process is reporting the research
findings. Before preparing the report, the marketer must take a clear
objective look at the findings to see how will the gathered facts answer
the research questions or support a negate the hypothesis posed in the
beginning. In most cases it is extremely doubtful that the study can
provide everything needed to answer the research question. Thus the
report must highlight the deficiencies and the reason for them, perhaps
suggesting areas that require further investigation. The report presenting
the results is usually a formal, written document (Dibb Sally at or opp cit).
TYPES OF RESEARCH
The research objectives and any hypothesis being tested determine the
approach to be used for gathering data when marketers need more
information about a problem or want to make a tentative hypothesis
more specific, they may conduct exploratory research. Exploration studies
discover the general nature of a problem and the factors that relate to it.
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UNIT 3
Marketing Research
This type of data must be gathered by observing phenomena on surveying
respondents. Secondary data are compiled inside or outside the
organization for some purpose other than the current investigation.
Secondary data include general reports supplied to an organization by
various data sources as well as are recorded data.
Sources of Secondary Data
Marketing often begin the market process by gathering secondary data.
They may use available reports and other information from both internal
and external sources to study a marketing problem.
Internal sources of secondary data can contribute significantly to research.
The following are four sources. Internal sources
Emails on the internet, accounting records, marketing records, marketing
data bank.
External -
periodicals, census reports government publications;
www, unpublished materials
Primary Data collection methods
The collection of primary data involves more lengthy, expensive and
complex process than the collection of secondary data. To gather primary
data, researchers using sampling procedures, survey methods,
observation and experimentation. These efforts can be handled in house
by its own research personnel or contracted out to private research
consultancies.
Sampling: Due to the fact that time and resources available for research is
limited, it is almost impossible to investigate all the members of a target
or population.
A population or universe comprises all elements, units or individuals that
are of interest to researchers for a specific study. A sample is a limited
number of units chosen to represent the characteristics of a total
population. The objective of sampling in marketing research is to select
representative units from a total population. Sampling procedures allow
marketers to predict buyer behaviour fairly accurately on the basis of
responses from the representative portion of the population of interest.
Most types of marketing research employ sampling techniques.
32
There are two basic types of sampling. Probability sampling and nonprofitability sampling. With probability sampling, every element in the
population being studied has a chance of being selected for study.
Random sampling is basic probability sampling. When marketing uses
random sampling, all units in population have an equal chance of
appearing in the sample units. In random sampling units are ordinarily
chosen by selecting from a table of random numbers which have been
statically generated so that each digit from zero to nine, will qualify for
probability sampling, will have equal probability of occurring in each
position in sequence.
Another kind of probability sampling is stratified sampling in which the
population of interest is divided into groups according to a common
characteristic or attribute and a probability sampling is then conducted
within each group. Using a stratified sample may reduce error that could
occur as a result of using a simple random sample. By ensuring that each
major group or segment of population receives its proportional share of
sample units, investigators avoid including too many or too few sample
units from each stratum. Usually, samples are stratified when researchers
believe that there may be variations among different types of respondent
for example many political surveys are stratified by sex race and age.
Area sampling, a variation of stratified sampling involves two stages:
(1) Selecting a probability sample of geographic areas, such as streets,
census tracts or census enumeration districts
(2) Selecting units’ individuals within the selected geographic areas for
the sample
To select the units or individuals within the geographic areas, researchers
may choose every house or unit, or they may adopt random selection
procedures to pick out a given number of units or individuals a total listing
within the selected geographic areas. Areas sampling may be used when a
complete test of the population is not available.
In quota sampling researchers divide the population into groups and the
arbitrary draw participants from each group.
Survey methods
Marketing researchers often employ sampling primary data through mail,
telephone, online or personal interviews surveys. Selection of a survey
method depends on the nature of the problem, the data needed to satisfy
the research objectives and any hypothesis and the resources such as
funding and personnel that are available to the research.
Mail survey
In a mail survey questionnaires are sent by mail to respondents, who are
encouraged to complete and return them. Mail surveys are used most
often when the individual chosen for questioning are spread over a wide
area and funds for survey are limited.
Telephone surveys
These are used where respondents answers to a questionnaire are
recorded by interviews on the phone, are widely used by business. A
telephone survey has some advantage over mail survey. The rate of
response is higher because it takes less effort to answer the telephone
than to fill out a questionnaire.
Computer assisted telephone interviewing this integrates questionnaire
data collection and tabulations and provide data to decision markers in
the shortest time possible.
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UNIT 3
Marketing Research
Questionnaire responses are entered on a terminal keyboard, or the
interview can use a light – pen (a pen – shaped torch) to record a
response on a light – sensitive screen.
On –line survey
The main focus on the marketing information system is on data storage
and retrieval. Regular reports of sales by product or market category on
inventory levels and records of sales people’s activities are all examples
of information that is useful in marketing decisions.
An effective marketing information system starts by determining the
objective of the information that is by identifying information needs
that require certain information. The business can then specify an
information system for continuous monitoring to provide regular,
pertinent information on both the external environment and internal
environment. FedEx, for example has developed interactive marketing
systems to provide instaneous communication between the company
and its customers. Through the telephone and internet, customers can
track packages and receive immediate feedback concerning delivery.
The company’s website provides valuable information about customer
usage, and what they think about company services. The evolving
telecommunications and computer technology is allowing marketing
information systems to cultivate one-to-one relationships with
customers.
Databases
Most marketing information systems include internal databases. A
database is a collection of information arranged for early access and
retrieval. Database allows marketers to tap into an abundance of
information useful in marketing decisions. Internal sales reports,
newspapers, article company new releases, government economic
reports bibliographic often accessed through a computer system.
Information technology has made it possible to develop databases to
guide strategic planning and improve customer service. Many
commercial websites require visitors to register and provide personal
information in order to access the site or make a purchase. Frequent
flier programmes permit on line to ask on loyal customers to participate
in surveys about their needs and desires, allowing online to track their
best customers’ flight patterns by day, week, month and year.
Marketing researchers can also use commercial database developed by
information researchers businesses to obtain useful information for
marketing decisions
Marketing many of these commercial databases are accessible on line
for a fee.
34
Unit summary
In this unit you learned
Summary

The strategic nature of information to marketing decision
making

The marketing research process

Types of research

Sources of data

Sampling methods

Various types of surveys
Assignment
No assignment at this stage
35
36
Marketing Research
Assessment
Assessment
36
1.
2.
3.
4.
5.
Justify the significance of marketing research
Explain marketing intelligence
Outline the marketing research prices
Identify types of research a company may undertake
Identify two main services of data available to a marketing
researcher
6. Identify types of sampling
UNIT 4
MARKETING INFORMATION SYSTEMS
Introduction
Upon completion of this unit you will be able to:
 [verb] [complete the sentence].
 [verb] [complete the sentence].
Outcomes
[Term]:
[Term]:
Terminology
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38
UNIT 4
Information is a very critical resource to a marketer. As Lancaster and
Regnolds observe possession and use of information gives an
opportunity to gain competitive advantage over competitors. Indeed
armies win wars, not just because of superior Military power, but
because they have effective intelligence gathering procedures. In the
same way forms are waging commercial war in a free market,
competitive economy. They too will have a better chance of
‘Winning4 if they have superior intelligence to then competitors. You
have probably come to understand that in this era information has
become to define success.
Lancaster and Regnolds argue like many other marketing authorities
that given this strategic nature of information an organization needs
to be proactive in the accusation and management of information.
They point out that; All aspects of information including its collection,
storage, retrieved and use must be managed.
The system devoted to managing the entire information needs of the
organization needs is referred to as Marketing Information system.
You may recall that in the definition of Marketing put forward by the
chartered Institute of marketing put forward by the Chartered
Institute of Marketing is referred to as a management process that
anticipates customer requirements (Please refer to the definition in
Unit 1). Note that the word “anticipates’. As Lancaster and Regnolds
(Opp cit) explain markets are dynamic and therefore marketing
management needs to anticipate and stay ahead of things. It is for
this reason that decision making at a strategic level requires some
form of prediction or forecasting of likely future conditions.
The two authors further note that it is true to say of any information
system or decision support system, that end products is usually a
decision about the future made in the present often based largely on
information about the past. This process by its very nature involves
forecasting. Without information it is possible to forecast.
Marketing Information System
A Marketing Information System (MKIS) is a systematic process for
the management of marketing information. Although this term
suggests the use of computer networks, a marketing information can
be created and managed manually. But the main point you need to
note is that every form must organize the collection, storage and
distribution of information to its managers in to function effectively.
As Kottler observes companies of all sizes carry out audits to design
information systems that will meet their information needs and give
them a competitive edge in the market place. Kottler (1997) defined
marketing information system:
38
A marketing Information System
MkIS consists of people, equipment and procedures to
gather, sort, analyse, evaluate and distribute information
to marketing decision makers.
As observed earlier even in the absence of computers there is no reason
why an MkIS can still be based entirely on a manual system of reference
cards and flies. Such a system will lack case of storage and retrieval, but a
manual system is better than having no system at all and leaving the
management of information to chance (Lancaster & Regmolds opp cit).
Components of the MkIS
According to Kotler (opp cit) should be made up of four separate but
interrelated parts. These are internal accounting system; the marketing
intelligence system, the marketing system.
Internal Accounting System
This subsystem involves generation, recording, storage and retrieval of
according data. Thus it refers to all received and generated by the form.
The documents constitute source are delivery notes, credit notes, goods
return slip, invoices and other related data. This internal accounting system
can yield data with little effort and a little or no cost.
The Market Intelligence System
Organisations in the course of the operations produce a lot of data as we
have seen. A company can institute ways to collect information about
competitors. This system that attempts to collect and manage the source of
loosely collected information is referred to as the marketing intelligence
system. Kotler defines the market intelligence system as:
A market intelligence system is a set of procedures and
sources used by Managers to obtain their every day
information about pertinent developments in the
marketing environment.
Actually this source is very diverse in nature. For example Kotler has
observed that some companies even go to the extent of gleaming pieces of
data from a rival firm’s rubbish dump; job advertisements can also be source
of information about what competitors are planning. Information is also
obtained from conferences; workshops, product launches; Products of
competitors can also be bought and analysed from own labs. The sales
forces are yet another source of very good intelligence.
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UNIT 4
Data that is not immediately usable can be “warehouse” on the company
systems and ruined later. Data mining involves getting information from
existing data, perhaps that from the data warehoused and by means of
appropriate computer software getting various interconnections and of data
so that the data yielded can give you completely new insights that data just
sitting on the computer unmined cannot give you.
Marketing Research System
Marketing research is treated separately in this module. In summary this is
the final input to the marketing information system. The marketing research
system makes use of both secondary data (data already in existence, and
primary data (data collected for a specific piece of research for the first time)
Please see the unit for further treatment of marketing research).
The Analytical Marketing System
According to Lancoster and Reynolds (opp cit) this subsystem of the MRIS
does not produce new data. Rather it takes data from the other three
component parts of the system input to its value. Users of the system are able
to do this by applying what is termed as management science techniques to
the data, thereby transforming it into a form that makes it more easily
understood and valuable marketing decision makers. The ultimate goal is to
prepare a marketing plan which is part of the overall corporate plan.
Management science or operational research is detailed subject but the
following heading that appears in R Lancoster and Regnold pages 95 – 96
can give you a general feel as regards harvesting of data.
Simulations: Here many marketing situations using statistical or
mathematical techniques. For example“queing theory” can be used to predict
the effects of bottlenecks in the “flow” of customers within a supermarket,
Brand switching matrices can be used to simulate competitors response to a
price cut or promotion and the effects on relative brand share using
probability to predict brand switching behaviour.
Optimisation: Linear programming can be used to calculate optimum levels
of output, marketing mix elements and so on.
Forecasting: Information collected from formal marketing research and
marketing intelligence gathering of internally generated information can be
used as input data in a variety of forecasting models. Data collected over a
period of time can be extrapolated into the future using time series
techniques. The use of such techniques allows the manager to model
seasonality and cyclical effects.
Hypothesis testing: In many situations, particularly marketing experiments,
managers have certain hypotheses or strong ideas that they want to text
scientifically. Methods such as square and analysis of variance allow
scientific testing relative differences in the effectiveness of marketing
variables.
DESGNING? IMPLEMENTING AND CONTROLLING THE MkIS
The MkIS must be designed to get the way marketing personnel go about
than daily activities. Access and use of the system must be as easy and
natural to potential users as the use of a telephone.
40
According to Lancoster and Regnolds the first step is to conduct an analysis of
how people do their job and how they pass on the results in the form of
information. This is what is known as ‘systems analysis’ Information audit then
follows. This is the finding marketing team requires in order to carry out their
job effectively.
IMPLEMENTATION
As the two authors argue, people are usually suspicious of new ideas and
procedures and so before implementation, the system must be explained to
managers. The reasons for the introductions must be explained, Training in
the use of the MRIS should be conducted if possible. To succeed the new
system must have the support of top management otherwise it will be
regarded as the latest management not to be taken seriously.
CONTROL
As explained many people tend to be not comfortable with new systems and
so as Lancoster & Reymolds have observed, many people may feel that if they
let the new system die a natural death people in the organization will forget
about and things will revert to the normal situation. Therefore a manager
must be appointed to be responsible for its up keep and management. This
manager should be responsible to ensure that proper procedures are followed
and correct information is produced and distributed.
Unit summary
In this unit you learned

Summary
Assignment
[Add assignment text here]
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UNIT 4
Assessment
42
Unit 5
Marketing strategy
Introduction
The unit addresses requirements for developing marketing strategy.
Upon completing this unit you will be able to
Outcomes



craft a marketing strategy
identify various stages in creating a marketing plan
explain implementation and control of a marketing plan
[Term]:
Terminology
[Term]:
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Unit 5
Marketing strategy
Marketing strategy can be defined as –“A strategy indicating
the opportunities to pursue specific target markets to address,
and types of competitive advantages that are to be developed
and exploited”. (Dibb et al 2006)
Implicitly the strategy requires clear objectives and focus in line
with an organization’s corporate goals; the right customers
must be targeted more effectively than they are by
competitors. Associated marketing mixes should be developed
as marketing programmes to implement the marketing
strategy successfully.
Before we proceed with the marketing strategy let us take a
look at the organizational framework which gives the context in
which the marketing strategy is developed and executed.
The corporate strategic corporate planning comprises the
following sequential steps.
Company Mission Statement
A company mission statement - This defines the business the
organization is in. (You may wish to look at mission statements
of various organizations including your own organisation).
The mission statement has an influence on all planning
throughout the organization. It is a statement of the
company’s overall business philosophy as you could have
noticed from the mission statements you have examined. As
Lancaster and his colleague explain it is normally a set of
guidelines rather than something that is stated in quantitative
terms.
Situational Analysis
Here a company evaluates external and internal factors that
affect the planning process and asks questions. Where are
now? This again as Lancaster and Reynolds explain, means
researching and analyzing all information that might have a
bearing on the organization and its operations from internal
factors such as individual departmental company resources, to
the external factors such as current political events etc.
Set organizational objectives which require company
management to put forward guidance as to how the company
should fulfil its mission and clarifies where the company wants
to be. Unlike the mission statement, objectives need to be
expressed in achievable quantitative terms. They need to be
SMART.
Choose strategies to achieve these objectives. Strategies are
concrete ideas that set about achieving company objectives
and relate to how the mission will be accomplished.
44
The foregoing planning is at the corporate level that is at the
level of the organization as whole. It is done by top
management.
Of course mangers below top management do make a
contribution. The manager responsible for marketing
contributing significantly.
We now move to the next level of planning and this is at the
Strategic Business Unit Level. What is a Strategic Business Unit
(SBU for short) Strategic Business Unit can be defined as a
division, product line or other profit centre within a parent
company). To illustrate let us take South African Breweries
whose headquarters is in London) Planning as referred to
above would have been taken at level of South African
Breweries as a corporate entity) then it moves to the level of a
Strategic Business Unit. These Strategic business units (SBUS)
owned by South African Breweries in Zambia would be units
such as Zambia Breweries Copperbelt Bottling Company, and
Zambia Bottlers and Northern Breweries.
Each strategic Business Unit then produces its own plan. At
this point planning moves to the functional level (for example
marketing and it ends up at sub-functional level for example
sales or advertising;
In many instances situation such as the above where we have
may not be the case. The organisation may not own other
companies which are strategic business unit. For example
Mulungushi University may have no strategic business units.
Thus planning at corporate level will only involve top
management – next senior management produces the business
plan. Finally the process moves to the functional level. At this
level by Mulungushi University had a marketing manager
he/she will then produce the strategic marketing plan,
culminating in the production of a marketing plan.
Corporate level
SBU level
Functional level
At the top management levels, plans are for longer term and
can be for anything from one year to five years or even more
years depending on the organization’s planning horizon in the
particular industry. It is at this level also that the strategic
business unit (SBU) are created with a view to carry out the
general plans decided upon by top management (Lancaster &
Reynolds opp cit)
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Unit 5
Marketing strategy
As defined earlier a strategic business unit “is a group or unit
within an organization that comprises separately identified
products or market divisions with specific market focus”.
Lancaster & Reynolds) The Chief Executive or Manager of an
SBU has the responsibility for integrating all that SBU’s
functions into a marketing programme.
Planning at functional level tend to be for one year or even
less.
An overview of Marketing Planning
We draw considerably on Lancaster and Reynolds (2004)
The authors argue and cogently that there is no simple
formular that one can always apply to marketing planning.
Most models are variations of different models and indeed this
is not strange in Social Sciences. However the definition put
forward by Keller (1997) is illuminating. The definition is the
managerial process of developing and maintaining a viable fit
between the organization’s objectives, skills and resources and
its changing market opportunities. The aim of strategic
planning is to shape and reshape the company’s business and
products so that they yield target profits and growth.
Diagram
The following diagram represents a relatively comprehensive
model that gives an overview of strategic and tactical
marketing planning process. From the above you can see how
marketing planning fits into corporate planning framework and
then how more detailed activities take place resulting in a
practical marketing plan.
46
Lancaster and Reynolds have dealt with each of these items in
marketing plan as follows:
This is the external audit part of what is called the company
audit. Recently, another E has been added to the equation and
standing for the environmental and making the acronym
PESTLE. And more recently still yet another E has been added
for ecology making the acronym STEEPLE. However it is now
questioned whether this degree of subdivision is really
necessary as the original PEST contains all the necessary
subdivisions of the external and it.
Statement under each of the subheadings in the above model
need not be or justified as they are observations that help
formulate more detailed plans at a later stage.
The next part of the situational analysis concerns what is called
the company audit as in corporate planning terms, the internal
audit. This looks at the capabilities of the company, SBU by
SBU and department by department. Again short statements
or observations are made that do not have to be justified.
These two actions both at an external and internal level are
what are called corporate audit process and constitute
situational analysis. Marketing’s part of this total corporate
audit procedure is termed “marketing audit” and it is included
here as part of marketing planning because it is the beginning
of the marketing planning process.
Swot Analysis
SWOT analysis (strengths, weakness, opportunities and
threats) is an attempt to translate company specific factors
from company audit into company strengthness, weakness plus
external environmental factors (from the PEST analysis) into
external opportunities and threats.
Marketing Objectives
Objectives are concerned with what is to be achieved unlike
strategies which are the means of achieving objectives. These
objectives obtained from corporate level strategies and such
objectives should be SMART, standing for, specific measurable,
realistic and time constrained. An objective must have
measurable characteristic that might relate to a standard of
performance such as a percentage level of profit or a situation
that has to be achieved such as penetrating a specific market.
Forecast Market Potential
This is a stage that many marketing planning text seem to
forget. This is illogical for without a forecast of market
potential a company does not know for what it should be
making its plans.
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Unit 5
Marketing strategy
Generate Marketing Strategies
Strategies are means through which marketing objectives can be
achieved. They are meant to detail selected approaches that the
company will use to achieve its objectives. Determining strategies leads
to a series of action statements with clear sets of steps to be followed.
To achieve objectives operational decisions then come from these
marketing strategies and form the tactical foundations of detailed
marketing mix programmes. The handling of the marketing mix is at the
tactical level. We use the Ansoff matrix to generate marketing
objectives.
To develop strategies for competing in the market place, we use
Potter’s Generic strategies matrix.
Assumptions and Contingency Plans
Assumption relate to external factors over which the company has little
or no control. These should be stated as a series of points that relate to,
and which preface, the make up of the detailed marketing mix plans in
the next stage. Assumptions should be as few as possible. For each
48
assumption a directional contingency plan should be formulated so, in
the case of an assumption being wrong in practice an appropriate
contingency plan can be brought in. At this stage contingency plans
should not be detailed. They will probably only consist of a sentence or
two that are merely directional plans to be implemented if assumptions
are incorrect in practice.
Detailed marketing mix programme
This enables the organization to satisfy the needs of its target markets
and achieve its marketing objectives. It is what comprises the greater
part of an organization marketing efforts. The first part of the
programme determines the marketing mix where detailed consideration
is given to each of the areas of the 4 Ps plus segmentation, targeting
and positioning considerations. The ingredients of marketing mix should
be combined in an optimum way so that they work together to achieve
company objectives.
This part of the plan is concerned with who will do what and how it will
be done. In this way responsibility, accountability and action over a
specific time period can be planned, scheduled, implemented and
reviewed.
Budget, resources and staffing
Detailed decisions having been made in relation to different elements of
the marketing mix, the next stage of the programme is to budget.
Budgeting covers not only general marketing expenditure but also
salaries and expenses. If the plan calls for an increase in sales and
market share, then this has implications for the marketing department.
It is at this budgeting stage that plans are sometimes modified in the
light of reality and the initial marketing objectives might well have to be
modified.
Timescales
This often takes the form of a Gantt chart that places time along the tip
and activities down the side.
Implement the Plan
The plan is put into action within the predetermined budget and
resource parameters and along time scale that has been agreed. More
importantly those who will carry out the plan should be informed of its
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Unit 5
Marketing strategy
detail and know the part they must play within its implementation to
ensure success.
Measure and Control
A marketing plan cannot be operated without the means to monitor,
measure and control the progress. A system of controls should be
established whereby the plan is reviewed on a regular and controlled
bases and then updated as circumstances change. Such controls can
address tactics in terms of sales analysis which will commence with
comparison of budgeted sales revenue. Variations might be due to
volume or price variances due to having to cut prices to match the
tactical actions of competitors.
The marketing information system provides essential inputs to the
marketing planning intelligence, marketing research and the
organization’s own internal accounting system from marketing
intelligence through the field sales force or from marketing research.
Information on sales analysis is fed into the system to determine
whether or not forecasted sales are being achieved. As the planning
horizons unfolds, if plans do not go exactly as anticipated action can be
taken as required and this is the reason behind the feedback. These
measures of performance allows the planner the opportunity to adjust
and fine-time plans as necessary during the planning period.
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Unit summary
In this unit you have learnt
Summary





The nature and scope of corporate strategic planning
Other levels of strategic planning
The definition and importance of the Strategic Business
Unit (SBU)
The stages of strategic planning at corporate level
Marketing planning process within the strategic Business
unit culminating in the production of a marketing plan.
(Try and produce a marketing plan involving one product
your organization markets or just come up with your own
product)
Assignment
No assignment at this stage
Assignment
Assessment
Self Assessment Questions
Assessment
1. Explain the reasons for a company coming up with a
marketing strategy
2. Identify the levels at which planning is undertaken and
show exactly where marketing planning begins
3. Explain what you understand by situational analysis
4. Explain the use of SWOT analysis in making situational
analysis
5. Explain how the PEST factor analysis helps in situational
analysis
6. Explain the use of the Boston Consulting Group Matrix in
analyzing SBU’s
7. How can a company use the Ansoff matrix in developing
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Unit 6
Marketing Segmentation, Targeting and positioning
marketing objectives
Unit 6
Marketing Segmentation, Targeting
and positioning
Introduction
Outcomes
The unit explains why organisations segment markets in order to
target their customers more effectively. The assumption being
that customers are never homogeneous in terms of
characteristics. Market segmentation addresses both herogeinity
and homogeneity in the market.
After completing this unit you will be able to:





Explain the importance of market segmentation
Identify reasons for segmentation
Explain segmentation, targeting and positioning
Identify bases for segmenting a market.
Determine the criteria for effective segmentation
[Term]:
[Term]:
Terminology
What are markets? Market can be defined as a group of people who, as
customers or as part of organizations, need and have the ability,
willingness and authority to purchase a product class. The term market
if generally used may refer to the total population or mass market that
buys products. But as you can see the definition above is more
specifically referring to individuals seeking products in a specific product
category. (Dibb el at opp cit)
52
Dibb et al have put forward requirements for a group of people must
fulfil to be called a market.
(1) They must need or want a particular product or service.
(2) They must have the ability to purchase this is related to buying
power which consists of resources such as money goods or
services that can be exchanged in an exchange situation.
(3) They must be willing to use the buying power.
(4) They must have the authority to buy the specific products or
services.
Individuals sometimes may have the desire, the buying power and
willingness to purchase certain products but may not be authorized to
do so by law. Think of secondary pupils who may want, have the money
for and be willing to buy alcoholic drinks but a producer does not
consider them a market until they are legally old enough to buy alcohol.
Therefore a group of people that lacks any one of the four requirements
does not constitute a market.
Types of Markets
Markets can be divided into two categories – A consumer markets
consisting of purchasers and /or individuals who purchase products for
their own consumption and Business market also referred to as
organizational markets who buy products for any of three purposes:
resale, direct use in production of other products or use in general daily
operations.
Market segmentation is the process of grouping customers in markets
that are hetogenious into smaller, more similar or homogeneous
segments. The identification of target customer groups in which
customers are aggregated into groups with similar requirements and
buying characteristics.
A market segment is therefore a group of individuals, groups or
organizations sharing one or more similar characteristics that cause
them to have relatively similar product needs and buying
characteristics. Market segmentation identifying such groups, so that
marketers are able to develop product or service benefits that are
appropriate to particular target segments and to be supported by an
appropriate promotional campaign, relevant customer service and
suitable pricing and place/distribution strategies.
Once market
segments have been identified marketers decide which if any, they
intend to enter (Adapted from Dibb et al)
REASONS FOR USING MARKET SEGMENTATION
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Unit 6
Marketing Segmentation, Targeting and positioning
Segmentation is seen to offer business a number of advantages that
make it easier to develop and capitalize on opportunities available to
them.
These advantages can be considered in terms of the
effectiveness of resource allocation and strategic planning, Here are the
reasons for segmenting a market a company might consider:
Customer Analysis: Most markets are characterized by intense
competitions. Within this environment companies need to understand
the nature of the competition they face. Who are their main
competitors? At which segment are they targeting their products?
Answering these set of questions allow marketers to make decisions
about the most of propriate segment to target and the kind of
competitive advantage to seek.
Effective Resources Allocation: All companies have limited resources.
To target the whole of the market is usually unrealistic. The
effectiveness of personnel and material resources can be greatly
improved when they are narrowly focused on a particular segment of
customers.
Strategic Marketing Planning: Companies operating in a number of
segments are unlikely to follow the same strategic plans in them all.
Dividing up markets allows marketers to develop plans that give special
consideration to the particular needs and requirements of customers in
different segments.
SEGMENTING, TARGETING AND POSITIONING
There are three stages to carry out market segmentation:
(1) Segmentation
- Consider the variables for segmentation
(2) Targeting
- Decide on targeting strategy
- Decide which and how many segments should be
targeted.
(3) Positioning
- Understand consumer perception
- Position products in the mind of the customer by
communicating the desired positioning
- Design appropriate marketing mix.
Let us briefly consider each of the above.
SEGMENTATION
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These are many ways in which customers can be grouped and markets
segmented. In different markets, the variables that are appropriate
change. The key as Dibb et al observe is to understand which is the
market suitable for distinguishing between different product
requirements. Understanding as much as possible about the customers
in the segment is also important, as marketers who “know” their targets
are likely to design an appropriate marketing mix for them.
Targeting
Once segments have been identified decisions about which segment to
enter can be made. Here are the options:
-
adopt an undifferentiated approach focusing on the total
market
concentrate on a single segment
offer one product and marketing programme to a
number of segments
target a different product and marketing programme at
each of a number of segments.
Product Positioning
Companies must decide how and where within the targeted segments
to aim a product or products, brands or brands. The needs and wants of
targeted customers must be translated into a single mix of
product/service, personnel, price, promotion and place/distribution.
The consumer’s view of the product and where it is positioned relative
to the competition is particularly critical. But you need to realize that,
after all, the paying public does not always perceive a product or brand
in the same way the manufacturer would like.
Bases for Segmentation
There are five main bases upon which markets can be segmented.
-
Geographics
Demographics including socio-economic, age, race,
religion).
Geographics
Psychographics (including attitudes, interests, opinions
and life style)
Behaviorics
Benefits
Geographic Segmentation
Geographic Segmentation divides the market into discernible
differences in consumer buying behaviour between one geographical
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Unit 6
Marketing Segmentation, Targeting and positioning
region and the next. For example segmentation can be based on the
provinces of Zambia if we can discern differences from province to
province. A District can be segmented into different segments for
example urban, peri urban high cost housing area and low cost housing
area.
Demographic Segmentation
Demographic Segmentation encompasses age, sex, education, income,
occupation and family composition.
Geodemographics
Geodemographics can be defined as analysis of people according to
where they live, it relies on the concept that people live in relatively
homogeneous neighbourhoods, and that these neighbourhoods are
capable of classification.
Behavioural Segmentation: benefits sought
Benefits
Benefit Segmentation relates to the different benefits being sought
from a product or service by customer groups. Individuals are
segmented directly according to their needs.
Behavioural Segmentation: situation specific
Situation specific segmentation refers to the actual situation in which
consumption of the product takes place. Dependent upon the situation,
it would appear that a different form of the product may be
appropriate, or even an alternative brand. For example the purchase of
ice cream may vary in relation to the following situations:
-
special occasion
everyday consumption by the family
an outdoor picnic
in a restaurant
in groups or alone
Psychographics
An individual’s activities, interests, opinions and values represent that
person’s life style. Quantities measures of lifestyle are known as
psychographics.
Psychographic Segmentation provides a wider analysis of the consumer
than is provided by simple demographic segmentation. It does not
replace demographic segmentation but enhances it, and in so doing
provides the opportunity to target individual consumers more precisely
within a specific geographic area; (Adapted from BPP Marketing Comm).
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CRITERIA FOR EFFECTIVE SEGMENATION
Markets must be aware that whatever the approach followed and
whichever base varities are used to segment a market haphazard
implementation can lead to ineffective market segmentation and
missed opportunities. To avoid such difficulties marketers should note
the criteria below for effective segmentation.
Size or Substitutability
One of the questions to be asked concerns whether the market is of a
sufficient size to justify attention. Will the segment generate sufficient
demand and hence sales t help create required return from that
segment? Many segments can be identified but they may not be seen
as being worthy of any further attention.
Measurability
The market segment needs to have characteristics that will assist in
measuring the market potential for the producer and consumer.
Accessibility
Easy to reach with the marketing mix developed.
Stability
The question of segment stability over time is important. This because
as BPP marketing communication observe for a company to divert
resources to a particular market segment that has been identified it
must reassure itself that the segment we remain stable over a long
enough period to warrant specific marketing attention.
Uniqueness in Response
The segment identified must exhibit similar behaviour characteristics.
This means that the individuals making up the segment should all
respond in a similar way to a targeted marketing strategy.
Actionable
This is the degree to which marketing programmes can be formulated
for attracting and servicing segments.
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Unit 6
Marketing Segmentation, Targeting and positioning
Unit summary
In this unit you have learnt
Summary

what is meant by the term market

various types of markets such as consumer markets and
business or organizational markets.

That market segmentation is the process of grouping
customers in that homogenous into smaller, more similar
segments

That a market segment is a group of individuals, groups or
organization sharing one or more similar characteristics
that cause them to have relatively similar product needs
and buying characteristics.

That segmentation is seen to offer business a number of
advantages that make it easier to develop and capitalize on
opportunities in terms of resource allocation and strategic
planning

Basis for segmentation. These being geographics,
demographics, geographics, psychographics, behaviourics
and benefits sought

Criteria for effective segmentation
Assignment
No assignment at this stage
58
Assessment
Self Assessment Questions
1.
2.
3.
4.
5.
What is a market
Explain the reasons for market segmentation
What do you understand by targeting and positioning
Identify the bans for segmenting a market
List the criteria for determining the effectiveness of a
segment.
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Unit 7
Consumer and Organisational Buying Behaviour
Unit 7
Consumer and Organisational Buying
Behaviour
Introduction
This will help you to see why it is important to study consumer
behaviour to target customer effectively with marketing strategies and
programmes.
Objectives
After completing this unit you will be able to




Evaluate the importance of recognizing buyer behaviour
Distinguish between consumer and organizational buyer
behaviour
Outline the buying decision making process of both the
consumer behaviour and organizational buying behaviour
Determine influences on buying behaviour
It is important for an organization to study consumer behaviour because
of the following reasons:
(a) The buyer’s reaction to the organization’s marketing strategy has
a major impact on the success of the organization.
(b) If the organizations are to implement the marketing concept
they must examine the main influences on what, where, when
and how customers buy. Only in this way will they be able to
device a marketing mix that satisfies the needs of customers.
(c) By gaining a better understanding of the factors influencing how
their customers will respond, organizations will be able to
predict the effectiveness of their marketing activities.
Consumers however do not behave the same way. Decision making and
purchase behaviour do vary within individuals and across product
categories. The variation arises due to a number of factors that
influence buyers. The following are the factor that influences consumer
behaviour:
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o
o
o
o
Cultural
Social
Personal
Psychological
These factors are not mutually exclusive. Marketers need to have a clear
understanding of how the factors interact and how they influence buyer
behaviour. Both separately and in their totality (BPP Education 2006).
CULTURAL FACTORS
Cultural factors include culture itself, subculture and social class.
What is culture? Culture comprises values and attitudes in life adopted
by people that helps them to interpret and communicate with others.
Nobody is born with culture. Culture is largely the result of the learning
process. As we grow up we learn a set of values, perceptions,
preferences and behaviour patterns through socialization in the family
and other institutions such as school and work.
This broad set of values is then influenced by the subcultures in which
we develop.
Subculture groups can be defined in terms of religion, ethnic
characteristics, racial characteristics and geographical areas, all of which
have influence on attitudes, tastes, taboos and life style.
A third cultural influence is that of social stratification that is social class.
The following are the key characteristics of social class:
a) People within a particular social class resemble each other more
than they resemble those from other social classes.
b) Social class is determined by a series of variables such as
occupation income, education and values, rather than by a single
variable.
c) Individuals can move from one social class to another
SOCIAL FACTORS
Within the context of culture, an individual is also influenced by a series
of social factors, such as reference groups, family role and status, all of
which can have direct effect on buying behaviour.
Reference groups are groups with which an individual identifies so much
that he or she takes on many of the values, attitudes and behaviours of
group members we can identify 4 types.
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Introduction
a) Primary Membership groups which are generally informal and to
which individuals belong and within which they interact-family,
friends, work colleagues etc.
b) Secondary membership groups, which tend to be more formal
than primary groups and within which less interaction takes
place-trade unions, religions groups and professional societies
are examples.
c) Aspirational groups, which individual would like to belong.
d) Dissociative groups, whose values and behavior the individual
rejects (BPP Education)
THE FAMILY
Another major social influence is the family particularly with regard to
roles and relatives influences exerted by different family members.
Research has yielded three patterns of decision making within the
family.
o Husband dominated - life insurance, kitchenware and television
o Wife dominated – washing machines, carpets, kitchenware and
furniture
o Equal – holiday, housing and entertainment
PERSONAL FACTORS
Influencing factors that can be classified as personal include such things
as age, occupation, circumstances and lifestyle.
Individuals will buy different types of product depending on age. This is
in particularly relevant to such products as clothes, furniture and
recreation. However, consumption may also be shaped by the stage of
the family life cycle within which an individual falls.
A person is occupation will influence consumption and the task for
marketers is to identify the occupational groups that have an above
average interest in their products.
Buying patterns are also heavily influenced by an individual’s economic
circumstance.
According to Kotler an individual’s economic
circumstances consists of:
o
o
o
o
Spendable income, its level, stability and pattern
Savings and assets including the percentage that is liquid
Borrowing power
Attitude toward spending vs spending
However, people coming from the same subculture, social class and
occupation may lead completely different lifestyle. Therefore a
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person’s lifestyle is yet another factor. A lifestyle is an individual’s
mode of living expressed by amongst other things, his or her attitude
and activities (Bpp Education publisher opp cit).
PSYCHOLOGICAL FACTORS
Process of buyer behaviour is also influenced by four major
psychological factors:
o
o
o
o
Motivation
Perception
Learning
Beliefs and attitude
Motivation is defined as a psychological factor which energizes,
activates and directs behaviour towards goals.
Motivation arises from perceived needs. These needs can be put into
two main types – biogenic and psychogenic.
o Biogenic needs arise from physiological states of tension such as
hunger, thirsty and discomfort.
o Psychogenic needs arise from psychological states of tension
such as the need for recognition, esteem or belonging.
Most needs are not intense enough to motivate an individual to act
immediately, but when aroused to a sufficient level of intensity the
individual will be motivated to act in order to reduce the perceived
tension.
THEORIES OF HUMAN MOTIVATION
For you to understand how human motivation takes place, let us briefly
examine Maslow’s theory of motivation Maslow’s theory of motivation
seeks to explain why people are driven by particular needs at particular
times. Maslow argues that human needs are arranged in a hierarchy
progressing in their orders of importance. Physiological needs safety
needs, social needs, esteem needs and self actualization needs.
According to Maslow a person will attempt to satisfy the most
important need first. When that need is satisfied it ceases to be a
motivator and the person will attempt to satisfy the next most
important need. For example, if you are hungry (a physiological need)
you will venture out from the relative warmth and satisfy your need for
food.
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Introduction
PERCEPTION
Perception can be defined as a process by which people select and
interpret stimuli into meaningful picture.
The way consumers view an object could include their mental picture of
a brand or the features they attribute to a brand. The way that a person
perceives a situation will affect how they act. Possible differences in
perception can be explained by three perceptual processes.
o Selective attention
o Selective distortion
o Selective rentation
SELECTIVE ATTENTION
A receiver will not notice all the commercial messages that he/she
comes into contact with so the sender must design the message so as to
get attention inspite of the surrounding noise. Repetition, size, music
sexual attractions are features used to attract attention.
SELECTIVE DISTORTATION
In many cases receivers distort or change the information they receive if
that information does not fit in with their existing beliefs. Put
differently people hear what they want to hear.
CONSUMER DECISION MAKING PROCESS
Even as consumers are influenced by the factors considered in the
preceding section, it is important to note that a consumer in making a
decision to buy he or she passes through 5 steps. The steps are the
following:
o
o
o
o
o
Step 1 Need recognition
Step 2 Information search
Step 3 Evaluation of alternatives
Step 4 Purchase decision
Step 5 Post purchase evaluation
Step 1 Need recognition
The process begins when the buyer recognizes a need or problem. This
can be triggered by internal thrust or external stimulus such as social
esteem. If the need rises to a threshold level it will become a drive.
Step 2 Information Search
Once aroused, the consumer will search for, more information.
Information sources can be from:
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o Personal sources – family, friends, neighbors, work colleagues
o Commercial sources- Advertising, sales people, packaging
displays
o Public sources- Mass media consumer rating organization
o Experiential sources – Handling, examining, using the products
Step 3 Evaluation prior to purchase
A customer focus judgments regarding what product he/she will choose
given a number of alternatives that might be available.
Step 4 Purchase Decision
Having evaluated the range of product/brand choices the consumer
may have formed a purchase intention and the purchase decision.
Step 5 Post purchase evaluation
Having purchase the product the consumer will experience some level
of satisfaction or dissatisfaction, depending on the closeness between
the consumer’s product expectations and the product’s perceived
performance. These feelings will influence whether the consumer buys
the brand again and also whether the consumer talks favourably or
unfavourably about the brand to others.
ORGANIZATION BUYING
Webster & Wind (1972) have defined organization or industrial buying
as the decision making process by which formal organizations establish
the need for purchased products and services and identify, evaluate and
choose among alternative brands and support.
There are fundamental differences between organizational and
consumer buyers. Kotler has identified these differences as:
a) Organizational markets normally comprise fewer buyers
b) Because of this smaller customer base and the power of larger
customers there is generally a close relationship between buyer
and seller in organizational markets, with a great degree of
customization and co-operation or product specification.
RESELLER MARKETS
This market comprises intermediaries such as retailers; wholesalers who
buy finished goods for resell at a profit.
Government markets
National and local government who buy goods and services to support
their internal operations and to provide public services and
infrastructure such as roads, bridges etc.
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Institutional Markets
This comprises organizations that seek to achieve charitable,
educational community or non business goals.
DECISION MAKING PROCESS OF ORGANIZATIONAL BUYING
The following are the stages in organizational buying:
Stage 1 Recognition of the problem
Stage 2 Develop product specifications
This is after assessing the problem and determining what will be
required to resolve or satisfy it.
Stage 3 Search for products
This is similar to information search in consumer buying. Organizations
for source of inform utilize trade publications, supplier catalogues and
soliciting proposals from known suppliers.
Stage 4 Evaluate products relative to specifications. These are
evaluated in order to ascertain whether they meet the product
specifications developed in the second stage.
Stage 5 Select and order the most appropriate product. In some cases
an organizational buyer may select a number of suppliers in order to
reduce the possibility of disruption.
The order will then be made, often made with specific details regarding
terms, credit arrangements, delivery dates and technical assistance or
after- sale services.
Stage 6 Evaluate the product and supplier performance against
specifications regarding product quality and the performance of the
supplier.
It is not always in all cases the full buying process outlined above will be
applicable. This is because situation differ. There are three main types
of organizational purchase:
a) The organization is facing a need or problem for the first time
and the full buying process will probably occur. As the problem
has not been encountered before, the organization will have to
produce detailed specifications of the product and ordering
routine.
b) Modified re-buy
Something about buying situation has changed but a lot still
remains the same. Such situations may include circumstance
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where a buyer requires faster delivery, different process or
slightly different product specifications
C) Straight re-buy
The buyer routinely purchases the same products under the
same terms of sale (BPP education opp cit)
THE DECISION MAKING UNIT (DMU)
One of the major differences between consumer and organizational
buying behavior is the fact that Organizational purchase decisions are
rarely made by a single individual. This obviously has a significant
influence on the buying process in the organizational context. Normally,
purchasing decisions are made by a number of people from different
functional areas, possibly with different statutes within the
organization. This obviously complicates the process of marketing and
selling the product and it is important that the marketer is fully aware of
the composition of the buying group and the relative importance to the
purchase decision of the individuals within it.
Webster and Wind (1972) provide us a framework for considering these
issues. The framework suggested by these joint authors is the Decision
Making Unit (DMU). The decision making unit is defined as all those
individuals and groupings who participate in the purchasing decision
process, who share some common goals and risks arising from the
decisions.
Webster & Wind (1972) suggest six groups within the DMU:
a) Users, who may initiate the buying process and help, define
purchase specifications.
b) Influencers, who help define the specification and also provide
an input into the process of evaluating the available alternatives
c) Deciders who have the responsibility of deciding on product
requirements and suppliers.
d) Approvers, who authorizes the proposals of deciders and buyers
e) Buyers, who have the formal authority for the selection of
suppliers and negotiating purchase terms.
f) Gatekeepers, who by controlling the flow of information may be
able to stop sellers from reaching individuals within the buying
group.
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Introduction
INFLUENCES ON ORGANIZATINAL BUYING BEHAVIOUR
Kotler identifies four main forces influencing the organizational buyer:
o
o
o
o
Environmental
Organizational
Interpersonal
Individual
Environmental forces include such factors as the level of primary
demand economic outlook the cost of money, the rate of technological
change, political and regulatory developments and competitive
developments. All these environmental forces must be monitored so as
to determine how they will affect buyers.
As regards organization influence, each organization has its own
objectives, policies, procedures, organizational structures and systems
which may constrain the freedom of action of organizational buyers and
this may in turn affect the decision making process.
Interpersonal factors are important where the buying decision may
involve a number of people. Within the buying group, the use of power
and the level o conflict significantly influence organizational buying
decisions.
Individual factors are the personal characteristics of the individuals in
the buying group such as age education, personality and position in the
organization. These will affect the decision making process and the
seller must be aware of their potential influence.
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Unit summary
In this unit you have learnt the following:
Summary

The importance of organizations studying buyer behavior

Various influences on buying behavior such as the
following: cultural, social, personal, psychological

The consumer decision making process sep 1 – need
recognition, step 2 – information search, step 3 –
evaluation of alternatives, step 4 purchase decision and
step 5 - post purchase evaluation

The way organization buy and the process of organizational
decision making.

The decision making unit (DMU)

The influences on organization buying.
Assignment
No assignment at this stage
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Introduction
Assessment
Self Assessment Questions
1. Define culture
2. Explain how cultural factors can affect purchase behavior
3. Explain how motivation works to influence purchase
behavior
4. How does perception work
5. Outline stages in consumer buying behavior
6. Outline stages in organizational buying behavior
7. Explain the DMU
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Unit 8
Product, Branding and Decisions
Introduction
This unit defines and classifies products. It also addresses the issues of
branding, packaging and product development.
Objectives
After completing this unit you will be able to:





Classify products
Evaluate the strategic nature of branding in marketing
Identify the role of packaging in marketing
Outline the product development process
Examine the utility of the product life cycle in marketing
strategic planning
The product is defined as anything that is received in an exchange with
another thing of value. It is a complex of tangible and intangible
attributes, including functional, social and psychological utilities or
benefits. A product can be a physical good, a service, an idea, or any
combination of these three. This definition also covers supporting
services that go with goods, such as installation ….. (Dibb et al 2006).
What is a product?
A good is a tangible entity, such as a bottle of coca-cola, a-loaf of bread.
A service, by contrast is intangible; it is the result of the application of
human and mechanical efforts to people or objects. Examples of
services include hair dressing, dry cleaning; tuition in marketing or
medical treatment. Ideas are concepts images, philosophies etc.
When buyers purchase a product they are buying the benefits and
satisfaction they think the product will provide. Services are benefits on
the basis of promise of satisfaction. (Dibb et al opp cit).
Classification of Products
Products can be classified into general categories:
a) Consumer products, these are products which are purchased to
satisfy personal and family needs.
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b) Industrial or business products are products bought for use in a
company’s operations or to make other products. The same
product can be both consumer product and an industrial
product. For example, when consumers purchase light bulb for
their homes, they are classified as consumer products.
However, when a large company purchases light bulbs to
provide lighting in a factory or office the same goods are
considered industrial products. Thus the buyer’s intent, or the
ultimate use of the product, determines whether an item is
classified as a consumer or industrial product.
c) Classification of Consumer Products The most widely accepted
approach to classifying products relies on the common
characteristics of the consumer buying behavior.
This
classification divides products into four categories, convenience,
shopping, specialty and unsought type of products thus a single
product can fit into more than one category to minimize this
problem, marketers think in terms of how buyer generally
behave when purchasing a specific item: (Dibb et al opp Cit).
d) Convenience Products - These are products that are relative
inexpensive, frequently purchased and rapidly consumed on
which buyers spend very little time in making a purchase
decision. As the term convenience suggested the convenience in
availability is a factor. You may think about items such as
chocolate, magazines, sweets, chewing gum, cigarettes, petrol
and soft drinks.
e) Shopping Products - these are goods that are chosen more
carefully than convenience goods. The items are purchased
infrequently and are expected to last a long time. For shopping
products shoppers are willing to spend effort in planning and
purchasing the items. They allocate time for shops and brands
with regard to prices, credit, product features and so on.
Examples of these products are appliances, furniture, bicycles,
jewelry and cameras.
f) Specialty Products that possess one or more unique
characteristic and which a significant group of buyers is willing to
expend considerable effort to obtain are called specialty
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products. Buyers plan the purchase of a specialty product
carefully, they know exactly what they want and will not accept
a substitute. When searching for specialty products buyers do
not compare alternatives; they are concerned primarily with
finding an outlet that has a preselected product available. Like
shopping goods, specialty products are purchased infrequently,
causing lower inventory turnover and thus requiring relatively
high gross margins.
g) Unsought products These are products that are purchased
when a sudden problem arises or when aggressive selling
obtains a sale that otherwise could not take place. The
consumer does not usually expect to buy these products
regularly. Emergency windscreen replacement services and
head stones are examples. Life insurance is example of
unsought product that often needs aggressive personal selling.
(Dibb et al opp Cit).
BUSINESS AND INDUSTRIAL PRODUCTS
Business product can be classified into seven categories
These are basic materials that are used in the production of
consumer products and they become part of the physical
product – minerals, chemicals, agricultural produce,
materials from forests and oceans.
a) Major equipment – large tools and machines used for
production purposes such as cranes of earth moving
equipment.
b) Accessory equipment - Equipment that does not become a
part of the final physical product but is used in production or
office –examples include telephone system, stationery
supplies etc.
c) Component parts – Parts that become part of the physical
product and are either finished items ready for assembly or
products that need little processing before assembly, you
may think of parts used to assemble a car or bicycles .
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Introduction
d) Process materials – Materials that are used directly in the
production of other products. Unlike components parts,
however process materials are not readily identifiable.
e) Consumables supplies – These are supplies that facilitates
production and operations but do not become part of the
finished product – paper, pencils, oils, cleaning agents and
paints.
f) Industrial/Business services are intangible products that
many business use in their operations. These include
financial, legal, marketing, research, computer programming
etc.
PRODUCT LINE AND PRODUCT MIX
A product item is a specific version of a product that can be designated
as a discreet offering among a business’s products, for example Omo
detergent. A product line includes a group of closely related product
items that are considered a unit of marketing for example lagers
brewed by Zambian Breweries, castle lager, mosi lager, Rhino lager.
A product mix is the composite or total, group of products that a firm
makes available to customers for example all the products produced by
Zambian Breweries.
PRODUCT LIFE CYCLE
Just like biological entities pass through a cycle which progress through
growth and decline, so too do products.
Products pass through life cycles. A product is introduced into the
market; it grows; it matures, and when it loses appeal and sales decline,
it is terminated. Different marketing strategies are appropriate at
different stages in the product life cycle. Thus packaging, branding and
labeling techniques can be used to help create or modify products that
have reached different points in their life.
The life cycle through which a product moves is (i) Introduction, (ii)
growth, (III) maturity and (iv) decline.
As Dibb et al explain when a product moves through its cycle, the
strategies relating to competition, promotion, place/distribution; pricing
and marketing information must be evaluated periodically and possibly
changed. An astitute marketing managers uses the life cycle concept to
make sure that the introduction; alteration and termination of a
product are tuned and executed properly. By understanding the typical
life-cycle pattern, marketers are better able to maintain profitable
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products and drop unprofitable ones. Here is a diagrammatic product
life cycle.
Introduction Stage of the life cycle begins at a product’s first appearance
in the market, when sales are zero and profits are negative. Profits are
below zero because a new product incurs development costs, initial
revenues are low, and at the same time a firm must generally incur the
significant expenses incurred during promotion and distribution. As
time passes sales should move upwards from zero and profits should
build up from the negative position.
During growth stage, sales rise rapidly, and profit reach a peak and then
start to decline. The growth stage is critical to a product’s survival
because competitive reactions to its success during the period will affect
the product’s life expectancy. At this point a typical marketing strategy
encourages strong brand loyalty perhaps using sales promotion and
competes with aggressive emulators of the product. During the growth
stage a company tries to strengthen its market share and develop a
competitive position by emphasizing the product’s benefits. Aggressive
promotional pricing, including price cuts, is typical during the growth
stage.
During the maturity stage, the sales curve peaks and starts to decline,
and profits continue to decline. This stage is characterized by severe
competition, with many brands in the market. Competitors emphasize
improvements and differences in their versions of the product.
Inevitably, during the maturity stage, some weaker competitors are
squeezed out or switch their attention to offer other products. For
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Introduction
example, some brands of DVD player are perishing now that the product
is reaching the maturity stage.
During the maturity stage, the producers who remain in the market
must make fresh promotional and distributional efforts. These efforts
must focus on dealers as much as on consumers to ensure that brand
visibility is maintained at the point of sale. Advertising and dealeroriented promotions are typical during this stage of the product life
cycle (DIbb et al opp cit).
During decline stage, sales fall rapidly. New technology or a new social
trend may cause product sales to take a sharp downturn. When this
happens, marketers must consider pruning items from the product line
to eliminate those not earning a profit.
BRANDING AND PACKAGING
Branding originated as means of differentiating products from
commodities but it has come to be of major importance for reasons far
wider in power and implication. In many markets it has taken over the
role previously held by the direct selling operation. (BPP marketing
Comm 2006).
What is a Brand
The following is a useful definition of a successful brand.
o
o
o
o
A brand is an identifiable product, service person or place
Augmented so that the buyer or user perceives
Relevant, unique added values, which
Match the buyer’s user’s needs closely (BPP Marketing Comm
Opp Cit)
It is possible to depict this definition in a diagram form. The brand
contributes the added value and can be seen as adding “clothes” to a
named product.
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The augmented product concept takes this stage further.
The core product satisfies the basic need of the customer which is then
built upon with actual product features and the augmented product
embellishments (“clothing”).
Remember we made reference to commodities but you may not have
understood what a commodity is. A simple way of describing the
difference between commodities and brands is the following:
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Unit 8
Introduction
Branding encourages the consumer to associate certain attributes with
a product. It differentiates similar products into distinct segments of
the market. For example Omo washing powder and boom detergent
paste.
The process of differentiation through branding allows the marketer to
establish a unique position for the package. Thus goods which in-fact
have close substitutes can be positioned as though there was limited
competition.
Brands are no longer simply convenient device to differentiate they are
of importance in their own right. It is often the brand that is bought, not
the products. The following are the benefits of a brand.
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INVESTMENT IN BRANDING
SUSTAINALBE ADVANTAGE
MARKET SHARE INCREASE
ECONOMICS OF SCALE
INCREASED PROFITABILITY
LONG TERM BRAND VALUE
The main idea behind branding is that a basic product can be converted
with marketing communications into a brand.
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Introduction
BRAND STRATEGIES
Brand strategies may be summarized as follows:Brand Strategy
Description
Line extension
Use of the same brand name to
introduce new flavors, colors and
packaging sizes
Brand extensions
Use of an existing brand name to
launch new products in other
categories e.g. Honda
into
Lawn mowers.
Multi-brands
Introduction of additional brands
into a particular market e.g.
Electrolux
owns
frigidacre,
kelvinator, wasting house.
New Brand
The development of a new product
into a market where none of the
company’s current brands would
be applicable (e.g. Kellogg’s entry
into sportswear)
Co-brand
Occurs
where
two
(or
more/established brand combine
together to generate increased
impact (Dibb etal opp cit)
Brand Licensing
A recent trend in branding involves the Licensing of trade marks. By
means of a licensing agreement, a company may permit approved
manufacturers to use its trademark. The licensee is responsible for all
manufacturing, selling and advertising.
Corporate Branding
Corporate branding is the application of product branding at the
corporate level, reflected visibly through the company name, logo and
visible presentations and in the business’s underlying values. Sometimes
the terms corporate image and corporate identity are also used in
relation to corporate branding. The concepts of corporate identity and
corporate branding overlap; both referring to what the company
transmits about itself.
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To be effective the corporate brand should be embedded in all company
actions. This means that all aspects of the company’s communication,
including internal communication with employees and external
marketing activities ranging from the annual report through to its
advertising and PR must convey a consistent message about the
corporate brand. (Adapted from Dibb et al 2006).
Packaging
According to Geoff Lancaster and Paul Reynolds (2004) packaging is the
“end” part of the product. As the external appearance and finish of a
product it will have an influence on the product’s ultimate acceptability
in the market. The packaging has a number of functions to perform:
1) To protect and preserve the contents
2) To help in the distribution of goods being transferred from
where they were made to the ultimate customer through a
number of logistics and intermediaries.
3) Selling in terms of promotional appeal as far as design and
information conveyed on the pack is concerned.
4) For convenience of users and as an aid to storage of contents.
Can you imagine if Colgate toothpaste was not available in a
tube?
5) To conform to statutory and voluntary regulations in providing a
list of contents or weight. For example it is a legal requirement
to wrap bread.
NEW PRODUCT DEVELOPMENT
Earlier in this unit – we considered the product life cycle. The
conclusion drawn from the PLC is that product when they have
run their full cycle come the end of their profitable life, and
consequently for a company to remain profitable it needs to
replace products that become obsolete or cease to be profitable.
Product development passes through 7 stages as follows:
1) Idea generation
2) Screening of ideas
3) Concept testing
4) Business analysis
5) Product Development
6) Test marketing
7) Commercialization
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Unit 8
Introduction
Let us now examine the process through which products are developed
from inception of an idea to a product being offered for sale
(commercialization).
Idea Generation
Idea generation involves business and other organizations seeking
product ideas that will help them achieve their objectives. This task is
difficult because only a few ideas are good enough to be commercially
successful. At the heart of innovation is the idea of identifying new
ways of serving a market. This new way can mean new products or new
innovations. Unexpected occurrences, new needs, industry and market
changes and demographic changes may all indicate new opportunities.
The forces of the marketing environment (see unit 2) often create new
opportunities.
New product ideas can come from several sources. They may come
from internal sources; marketing managers, researchers, sales
personnel, engineers or other organization personnel. Brainstorming
and incentives or rewards for good ideas are typical intra-organizational
devices for stimulating of new ideas.
New product ideas may also come from outside the firm – for example
from customers, competitors, advertising agencies, management
consultants, private research organizations and universities.
Screen Ideas
This stage involves first assessing whether the ideas match
organizational objectives and resources. Next the company’s overall
ability to produce and market the product is analyzed. Other aspects of
an idea that should be weighed are the nature and wants of buyers and
possible market environment changes. Most new product ideas are
rejected during the idea screening phase than during any other phase.
(Dibb et al opp Cit)
Concept Testing
Concept testing is a stage in which a small sample of potential buyers is
presented with a product idea, often in focus groups, through a written
or oral description and perhaps a few drawings to determine their
attitude and initial buying intentions regarding the product. The results
of concept testing can be used by product development personnel to
better understand which product attributes and benefits are most
important to potential customers. (Dibb et al opp Cit)
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Business Analysis
This is where the new product idea’s financial viability is appraised. By
now only “serious contenders will remain and a critical stage has been
reached”. Such analysis needs to take into consideration total costs
rather than simply development and production costs.
Product Development
This is a point at which the company has committed itself and this is
when costs start to increase sharply. Prototypes are developed and can
be assessed by marketing research through product appraisal tests. It is
here that product refinement and modification will be possible through
feedback from marketing research. It might also be the stage at which
the product is abandoned if expectations do not match reality. Rather
than risk high failure in the market place. (Lancaster G & Reymolds,
2004).
Test Marketing
The limited introduction of a product in geographic areas chosen to
represent the entire market. The aim is to determine the reactions of
probable users. According to Dibb et al (opp cit) test marketing
provides several benefits. It helps to gauge its sales performance, while
the product is being marketed in a limited area, the firm can identify
weaknesses in the product or in other parts of the marketing mix.
Corrections can be made more cheaply than if the product had already
been introduced nationwide. Test marketing also allows markets to
experiment with variations in advertising, price and packaging in
different test areas.
Commercialization
During the commercialization stage plans for fullscale manufacturing
and marketing must be refined and settled and budgets for the project
prepared. Results of test marketing are analyzed to see whether there
are any changes that can be made to the marketing mix before
introducing the product. The product at this stage is fully introduced in
the market.
ENCOURAGING ADOPTION OF A NEW PRODUCT
It is common assertion that 90% of new products fail. Given this
situation how can a marketer ensure that his/her new product has the
most chances of success in the market place. Here are five
characteristics associated with the success of a new product.
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Unit 8
Introduction
Characteristic
Comment
Relative advantage
The extent to which the consumer
perceives the product to have an
advantage over the product it supersedes.
Compatibility
The degree to which the product is
consistent with existing values and
previous experience of the potential
customer.
Complexity
The degree to which a new product is
perceived to be complex and difficult to use.
Triability
New products are more likely to be
adopted when customers can try them out
on an experimental basis.
Observation
A measure or degree to which adoption of
the product, or The results of using the
product, is visible to friends, neighbours
and colleagues. This process can be given,
added impetus by the use of celebrity or
other
role models (BPP Marketing Comm opp
cit)
CHARACTERISTICS OF VARIOUS ADOPTER GROUPS
Measure
Comment
Innovators
-
Eager to try new ideas and products
-
Higher Incomes
Self confident
-
Relevant on groups names
-
Oriented to the local community
Opinion leaders
-
Deliberate move carefully
-
Process of adoption takes longer
Positioned between the earlier and
later adopters
Early Adopters
Early Majority
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Late Majority
Laggards
-
Pressure to conform
-
Skeptical
Below average income and education
-
Independent
-
Tradition bound
Lowest socio-economic status
The time dimension to the process of diffusion and adoption is
important. The diagram suggests that each group learns by observing
the previous groups’ behaviours and then adopts the behaviour itself.
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Unit 8
Introduction
The marketer should therefore have as clear an understanding of the
dynamics of this process for his/her own industry as possible (BPP
marketing comm opp cit).
Adoption is the decision of an individual to become a regular user of a
product.
PRODUCT ADOPTION PROCESS
Adopters of new products have been observed to move through the
following five steps:
Stage 1 Awareness
Stage 2 Interest
Stage 3 Evaluation
Stage 4 Trial
Stage 5 Adoption
As put in BPP, Marketing communication the above progression
suggests that the marketer of the innovative product should aim to
facilitate consumer’s movement through these stages. The process of
adoption of innovation described here bears a remarkable similarity to
the “core” process of consumer buying behavior. Indeed, when
considering the adoption process, all we are considering is the
consumer buying behavior process for a new rather than an existing
product.
Diffusion
Diffusion can be defined as the process by which an innovation is
communicated overtime among the individuals within society who
comprise the target market.
Four key elements significant to the process of diffusion:
o
o
o
o
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The innovation itself
The communication process and channels used
The time at which individuals decide to adopt the product
The social system involved and to measure the extent of brand
awareness, brand switching and repeat purchase that result
from alterations in the marketing mix.
Unit summary
In this unit you learnt the following

Definition and classification of products

The product life cycle

The importance of the concept of branding

The functions of packaging

Brand strategies

New product development process

Factors encouraging adoption of products

Characteristics of various adoption groups

The product adoption process
Assignment
No assignment at this stage
Assessment
Self Assessment Questions
(1) Identify categories products may be classified into
(2) By means of a diagram depict the product life cycle
(3) Explain how the product life cycle is used in marketing
strategic planning
(4) Define the term brand and give examples
(5) Explain each of the stages in product
(6) Identify product adoption process
(7) Explain 5 characteristics associated with the success of a
new product.
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Unit 9
Marketing Environment
Unit 9
Marketing Environment
Introduction
This unit examines the explosion of the service industry in advanced
economics and in Zambia. It brings out the implication of this increase in
the importance of services on the field of marketing. It also looks at the
implication of the unique characteristics of services for marketing.
Objectives
After completing this unit you will be able to:



Examine the explosion of the service industry and the
implication this has on marketing
Evaluate the effect of the unique characteristics of a service on
marketing
Handle the revised and extended marketing mix for service
marketing effectively.
The service sector in recent years has grown considerably in most
economies and statistics from various countries indicate that it has
outstripped the manufacturing industry in term of contribution to the
countries’ GDP and in terms of employment. For example in the United
States according to the US Bureau of Labour statistics the service
producing sector will continue to be the dominant employment
generator in the US economy, adding about 20 million jobs by 2014.
Employment producing sector is expected to increase by 17% over 2004
– 2014 period. Manufacturing employment in the US is expected to
decrease by 5%. (Kotler and Keller, 2009).
According to Dibb et al in Europe as in the United States, the
importance of services in the economy is increasing with nearly two
thirds of the EU workforce employed in the sector.
The Zambian experience is difficult to document due to lack of statistics.
But we can be able by observation to conclude that the service sector
has grown when we look at increase in retail outlets, number of banks,
increased bus services etc. and the increase in public expenditure on
services such as education and health. There is also a proliferation of
88
small business within the service sector such as hair dressing,
drycleaning etc.
In recent years we have also witnessed the increase in employment in
services due to the transfer of certain kind of household jobs to
Institutions such as cleaning, looking after children etc.
Given the importance of the service sector in our economy it becomes
necessary to handle marketing of services separately from the
marketing of physical products. The unique characteristics of a service
is also a very strong justification to treat marketing of services
separately from that of physical products.
UNIQUE CHARACTERISTICS OF SERVICES
Intangibility
Services are essentially intangible. It is often not possible to taste, feel,
see, hear or smell services before they are purchased.
Inseparability
Services often cannot be separated from the person of the seller.
(performing a service occurs at the same time as full or partial
consumption of it) Goods are produced, sold and consumed whereas
services are sold and then produced and consumed.
Heterogeneity or variability
It is often difficult to achieve standardization of output in service. Even
though standard systems may be used. For example two lecturers of
marketing cannot teach exactly the same. Service quality may vary from
employee to employee. In the same organization and from the same
person over time. For example a marketing lecturer cannot teach in the
same manner at all times. Due to this it is difficult for a customer to
judge quality in advance of purchase;
Perishability
Services are perishable and cannot be stored. Spare seats on a package
tour or an empty hotel room represent capacity lost for ever. In
addition, with some services, there is fluctuating demand which may
aggravate the perishability feature. The point is that you cannot put a
service in a store room when there is less demand to be supplied later
when demand rises because a service is perishable.
Ownership
A service cannot be owned. For example when you purchase a
transport service from Lusaka to Kabwe you cannot own that particular
service and be able to produce it to another person as evidence.
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Unit 9
Introduction
Pure tangible goods Vs Pure Service
A conventional framework used in marketing is that an organization’s
offering to the market place can consist of goods, services or a
combination of both. Four broad categories on offer have been
distinguished and they may be seen as lying along a continuum. These
four categories are:
A pure tangible good
The offer consists of a pure tangible (e.g. salt, toothpaste) with no
explicit service accompanying it. The object of the sale is a tangible
item.
A tangible good with accompanying services
A tangible good with accompanying service (e.g. a motor car). The
objective of the sale is a tangible item.
A service with accompanying goods and services
The offer consists of a service with a accompanying goods and/or
services (e.g. passenger transport) the object of sale is intangible.
A pure service
The offer consists of service (e.g. message). The object of sale is an
intangible item.
What this continuum emphasizes is that infact most ‘products’ are
combinations of elements or attributes which are linked together.
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There are few ‘pure’ products and pure services. Shoes tack suggests
that marketed entities are combinations of discrete elements, tangible
and tangible.
THE MAKERTING MIX FOR SERVICES
By now you are familiar with the marketing mix – 4Ps of marketing (you
may revise Unit 3 if you do not fully understand the marketing mix
before proceeding further).
The marketing mix in order to apply it to the marketing of services has
been revised. The modification of the marketing mix has been modified
as follows by Booms and Bitner: (The modification results from the idea
of accommodating the unique characteristics of service).
Marketing Mix for Services Marketing
(a) Product
(b) Price
(c) Place
(d) Promotion
(e) People
(f) Physical evidence
(g) Process.
We look at each of these in turn.
Product
The service product requires consideration of the range of services
provided and the quality of services provided and the level of services
provided.
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Unit 9
Introduction
Price
Price considerations include levels of prices, discounts, allowances and
commissions, terms of payment and credit. Price may also play a part in
differentiating one service from another and therefore the customer’s
perception of value obtained from a service and the interaction of price
and quality are important considerations in many service price sub-mix.
Place
The location of the service provider and their accessibility relates not to
just to physical accessibility but to other means of communication and
contact. Thus the types of distribution channels used (e.g. travel
agents) and their coverage is linked to the crucial issue of service
accessibility.
Promotion
Promotion includes the various methods of communicating with
markets whether through advertising, personal selling activities, sales
promotion activities and other direct forms of publicity and indirect
forms of communication like public relations.
People
People who perform production or operational role in service
organizations (like clerks in a bank or fast-food outlet) may be as much a
part of and contributors to the service product. A feature of many
service organizations is that operational staff may occupy the dual role
of both performing a service and selling a service. How a service
performer operate in a service organization can be just as critical to the
selling of the service as conventional selling. Just imagine being served
at the enquiries counter in a bank by a not well informed and rude bank
clerk. Would you proceed to open an account? In a service industry the
secret of success is the recognition that customer contact personnel are
the key people in the organization.
An associated aspect in certain service operations is the relationship
between customers. That is a customer’s perception of the quality of a
service product may be formed and influenced by other customers.
Could you for example enjoy a trip on a bus if the other customers are
drunk and noisy? More to the point the people element refers both to
personnel providing the service and customers.
Physical Evidence
There are few “pure services” where physical evidence plays no part in a
market exchange. This components of physical evidence available will
influence consumer” judgments of a service marketing organization
physical evidence includes elements like the physical environment
(furnishings, colours, layout, noise) the facilitating goods that enable the
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service to be provided (e.g. cars used by a car rental company) and
other tangible clues like labels used by an airline or packaging of
cleaned goods used by a dry cleaning company.
Process
The behaviour of people in service organizations is critical. So too is the
process of service delivery. Cheerful, attentive and concerned staff can
help alleviate the customers’ problems of having to queue for service or
soften the blow of the breakdown of technology involved in service
production. They cannot however compensate entirely for such
problems. How the entire system operates-policies and procedures
adopted, the degree of mechanization used in service provision, the
amount of discretion employees have, the customer’s involvement with
the process of service performance, the flow of information and service,
the appointments and waiting system. The importance of these aspects
of service to customers, perceptions of satisfaction with services offered
make them areas of interest to marketing management.
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Unit 9
Introduction
Unit summary
In this unit you have learnt

The importance of service in a modern economy

Factors that account for the explosion in the service sector

Unique characteristics of a service that distinguish it from a
physical product

The revised and extended marketing mix for service
marketing – the 7ps
Assignment
Assessment
Self Assessment Questions
1. Account for the explosion of the services industry
2. Explain at least 4 characteristics that make a service
product unique
3. Identify the revised/extended marketing mix for services
4. Explain each of the elements of the extended marketing
mix for services
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Unit 10
Place/Distribution
Introduction
This unit argues that production of a product is not complete until the
product leaps into the hand of the consumers. It explains channels used
in delivering a product to the final consumer.
After completing this unit you will b e able to





Identify the importance of distribution of goods and services
Explain the functions of marketing channels
Examine options available in configuring distribution channels
Identify levels of market coverage
Explain the determinants of channel design decisions
Distribution – Place
Goods or services are of no value when they are in the hands of the
manufacturer or producer. Thus the producer must ensure that the
goods or services have moved in the direction of the ultimate consumer.
Distribution is aimed at getting the right goods to the right place at the
right time that is where and when they are needed (Finnegan et al
(1994)
As these authors point out further well planned distribution activities
will help a company to move goods from the point of production to the
point of consumption, to ensure that the right goods are available in the
right place and at the right time, and to ensure that the goods are
available in good conditions and in the amounts or quantities which are
convenient and affordable to the consumers. Good distribution assists
a business to overcome the physical distance between its goods and its
customers by finding the best means of transportation and by displaying
its products in convenient sales outlets which meet customers’
requirements by offering suitable opening hours, good accessibility and
secure parking (Finnegan opp Cit).
It is important for you to understand that the importance of distribution
also lies in the fact that decisions made in this area impact on other
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Unit 10
Introduction
decisions in the marketing mix such as product, pricing and promotional
decisions. Important decisions covering aspects of a company’s
distribution activities may involve relatively long term commitments by
the firm to its distributors. Some of these commitments have legal
implication. This being the case producer/manufacturers should make
their distribution/place decisions bearing in mind both the short and
long-term implications for the company’s marketing plans and activities
as well as for its profitability (Adopted from Finnegan et al).
In this unit we focus on the description and analysis of marketing
channels.
THE NATURE OF MARKETING CHANNELS AND SUPPLY CHAIN
MANAGEMENT
A marketing channel is defined as “a group of individuals and
organizations that direct the flow of products from producers to
customer (Dibb et al 2006).
Most channels of distribution have marketing intermediaries although
there is currently growth in direct marketing with some suppliers
interacting with consumers without the use of intermediaries or
middlemen who links producers to other middlemen or those who
ultimately use the product.
FUNCTIONS OF MARKETING CHANNELS
The following are the functions of marketing channels: Creating utility,
facilitating exchange efficiencies alleviating discrepancies, standardizing
transactions and providing customer service. Let us examine each of
these functions:
Creating Utility
Marketing channels create four types of utility: time, place, possession
and form
1. Time utility is having products available when the customer
wants them
2. Place utility is created by making products available in locations
where customers wish to purchase them
3. Possession utility is created by giving the customer access to the
product to use or to store for the future use.
4. Channel members sometimes create form utility by assembling,
preparing or otherwise refining the product to suit individual
customer needs (Dibb Opp Cit).
96
Facilitating Exchange Efficiencies
Marketing intermediaries facility exchange between sellers and
buyers. Intermediaries are specialists in facilitating exchanges. They
provide valuable assistance because of their access to and control
over important resources used in the proper functioning of
marketing channels. Dibb et al argue that even if producers and
buyers are located in the same city there are costs associated with
exchanges.
Alleviating Discrepancies
The functions performed within marketing channels help to
overcome two major distribution problems. These are discrepancies
in quantity and discrepancies of assortment. With regard to
discrepancies in quantity consider a company that produces cement.
To produce economically the company produces 200,000 bags of
cement. Few people however want to buy even 100,000 bags of
cement. They would probably buy only a few number of bags, say
100 bags. The quantity a company can produce efficiently is more
than the average customer can buy. This is referred to as
discrepancy of quantity.
An assortment according to Dibb (opp Cit) is a combination of
products put together to provide customer benefits. These set of
products made available to customers is a company’s assortment.
Most consumers need a broad assortment of products. Besides
cement, they want to buy concrete blocks, timber, wire nails, paint,
roofing sheets doorframes, window frames and other products for
construction work. Yet the cement manufacturer has few cement
products constituting a very narrow assortment. This produces a
discrepancy of assortment. This problem is overcome by sorting
activities of channel members. Assorting activities are functions
that allow channel members to divide roles and to do separate
tasks. This function may include, sorting out, accumulation,
allocation and assorting of product. Let us look at each of these
functions in turn:
Sorting Out
This is the first step in developing an assortment. It is separating
heterogeneous products into relatively uniform, homogenous
groups based on product characteristics such as size, shape, weight
or colour you can see examples of this in agricultural products and
other raw materials which vary widely in size, grade and quality. For
example the grape crop must be sorted out into grapes suitable for
making wine, those best for turning into grape juice and those to be
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Unit 10
Introduction
sold in supermarkets. You may consider other agricultural products
that are sorted out in similar manner (Dibb et al)
Accumulation
This can be described as the development of a bank or inventory
(store) of homogeneous products. For example dairy farmers who
produce relatively small quantities of milk can have their milk
collected along with milk from many other small producers thus
accumulated into thousands of litres of milk. This you will note
happens with regard to a lot of agricultural products.
Breaking bulk
This is the breaking down of large homogeneous products into
smaller lots. Breaking bulk resolves discrepancies in quantities, it
enables wholesalers to buy in truckloads and apportion products by
cases to other members of a channel. Imagine a beer distributors
buying truck load of beer and then sell in crates to buyers in cases or
crates. A food wholesaler for example serves as a depot, allocating
products according to demand after breaking bulk.
Assorting
This is a process of combining products into assortments that buyers
want to have available in one place. Assortment eliminates
discrepancies in assortment by grouping products in ways that
satisfy buyers. Assorting is especially important for retailers for they
try to create assortments matching the demands of consumers who
patronize their shops (Dibb et al).
Standardizing Transactions
Marketing channels help to standardize the transactions associated
with numerous products. For example when a customer visits a
supermarket to purchase a loaf of bread it is unlikely that the
individual will be able to buy half a loaf of bread, buy a loaf sliced
lengthwise, negotiate the price.
You can clearly see that many details associated with this purchase
of a loaf of bread are standardized.
Providing Customer Service
Channel members do a lot of work in providing customer service.
You will notice that when you visit a retail outlet retailers of durable
items give in store advice and demonstrates technical know-how,
delivery, installation, repair services, spare-parts including
instruction or training.
98
Types of Channels
Dibb et al have presented channel arrangement that will help you
understand how a producer can configure possible channels of
distribution of products.
The diagram below illustrates several channels used in the
distribution of consumer products or services.
Channel A
Channel A describes the direct movement of goods from producer
to consumer. Customers who pick their fruits from commercial
orchards or buy items from door to door sales are acquiring through
direct channel. A producer who sells goods directly from the factory
to end users and ultimate consumers is using direct marketing
channel.
The use of internet-e-commerce for marketing
communications, selling and purchasing has in recent years led to a
growth in direct marketing of a variety of products such as novels,
travel tickets, books, videos and CDs.
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Unit 10
Introduction
Channel B
Channel B, which moves goods from producer to retailers and then
to consumers is often used by retailers that can buy in quantity from
manufacturers.
Channel C
This is a long standing channel, particularly for consumer products,
channel C takes goods from producers to wholesalers then to
retailers and finally to consumers.
Channel D
Channel D through which goods pass from producers to agents to
wholesalers to retailers and then to consumers this is frequently
used for products intended for mass distribution such as processed
goods. A food processor may hire an agent to sell for example
biscuits to wholesalers. The wholesalers then sell to supermarkets,
vending machine operators and other outlets.
Channels for Industrial, business to Business Products or Services
Channel E
Channel E illustrates the direct channel for Industrial or business
products. In contrast with consumer goods, many business products
particularly expensive equipment such as steam generators, aircraft
and mainframe computers’ are sold directly to the buyer by the
producer.
The direct channel is most feasible for many
manufacturers of business goods because they have fewer
customers and those customers may be clusted geographically.
Buyers of complex industrial products can also receive technical
assistance from the manufacturer more easily in a direct channel.
Channel F
If a particular line of business products is aimed at a larger number
of customers the manufacturer may use marketing channel that
includes industrial distributors, merchants who take title to products
and carry inventory. Construction products made by JCB for
example are sold through industrial or business to business
distributors as are building materials, operating supplies and
equipment.
10
0
DIFFERENT LEVELS OF MARKET COVERAGE
There are three major levels of market coverage – intensive,
selective and exclusive.
Intensive Distribution – This is the use of all the available outlets for
distributing a product. This type of distribution is appropriate for
convenience products such as bread, chewing gum, beer and
newspapers.
Products of packaged consumer goods rely on intensive distribution.
Selective Distribution – In selective distribution, only some available
outlets in an area are chosen to distribute a product. This type of
distribution is appropriate for shopping products. Durable goods
such as furniture, electrical appliances and exclusive fragrances are
distributed this way.
Selective distribution is desirable when a special effort – such as
customer service from channel member is important. Shopping
products require differentiation at the point of purchase.
Exclusive Distribution
In this type of distribution only one outlet is used in a relatively large
geographical area. Exclusive distribution is suitable for speciality
products that are purchased rather infrequently, consumed over a
long period of time. It is often used as an incentive to sellers when
only a limited market is available.
Channel Design Decisions
In setting up a channel of distribution, the supplier must take into
account five things:





The customer characteristics
Product characteristics
Distributor characteristics
Channels being used by competitors
The Supplier characteristics
Customers
The number of potential customers their buying habits and their
geographical locations are key influences. The use of mail order
for those with limited mobility (rural locations, illness) is an
example of the influence of customers on channel design.
Product Characteristics
Some product characteristics have an important effect on the
design of the channel of distribution.
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1
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Unit 10
Introduction
(a) Perishability
Fresh fruit and newspapers must be distributed very quickly
or they become worthless. Speed delivery is therefore a
factor.
(b) Customization
Customized products tend to be distributed direct.
(c) After-sale/technical advice
Extent and cost must carefully considered staff training given
and quality control systems set up.
(d) Franchising has become popular means of growth both for
suppliers and franchisees who carry the set up costs and
license fees. The supplier gains additional outlets quickly.
Distributor Characteristics
The capability of the distributor to take on the distributive
functions.
Competitors’ Channel Choice
For many consumer goods a supplier’s brand will sit alongside its
competitors, products and there is little the supplier can do
about it. For other products, distributors may stock one name
brand only (for example in car distribution) and in return be
given an exclusive area of coverage.
Supplier Characteristics
A strong financial base gives the supplier the option of buying
and operating their own distribution.
(Adopted from strategic marketing BPP 2006)
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2
Unit summary
In this unit you have learnt the following:
Summary

The definitions of place and distribution channels

The functions of marketing channels

The different levels of market coverage in terms of
distribution

Factors to take into account when setting up distribution
channels
Assignment
Assessment
Self Assessment Questions
(1) What do you understand by the term place in the
marketing mix
(2) Explain carefully functions of marketing channels
(3) List factors that determine the choice of a distribution
channel
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3
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Unit 11
Pricing decisions and strategies
Unit 11
Pricing decisions and strategies
Introduction
The only mix element that produces the needed revenue and profit for
the business is price. This unit looks at pricing decisions and strategies
required for the price to perform the above role.
Objectives
After completing this unit you will be able to:




Evaluate the strategic nature of pricing
Identify various influences on pricing
Formulate pricing objectives
Design appropriate strategies to achieve objectives formulated
For products distributed through market mechanisms, price is the
financial mediating device by which exchange takes place between
providers of goods and services and their customers (Palmer & Cole
2004).
Price comes in many forms it takes the form of rent, tuition, fares, rates,
wages, commissions, tolls, charges, subscriptions, fees, tariffs.
The importance of pricing to the development of marketing strategy is
reflected in the diverse range of strategic uses to which it is put.
o At the beginning of a new product, pricing is often used to gain
entry to a new market. As an example, a firm of real estate
agents seeking to extend its operations to a new region may
initially offer very low commission rates in order to raise
awareness and gain entry to the local market.
o Price is used as means of maintaining the market share of a
product during its life and is used tactically to defend its position
against competitors.
o Ultimately, for organizations working toward financial
objectives, prices must be set at a level that allows them to meet
those objectives.
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4
ORGANIZATIONAL INFLUENCE ON PRICING DECISIONS
Profit maximization
(1) It is often assumed that all private sector organizations exist
primarily to maximize their profit and this is dominant influence
on pricing policies.
(2) Market Share Maximization
An objective to maximize market share may be very important to
an organization if it is to achieve a critical mass in order to
achieve economies of scale and therefore competitive
advantage. This objective of maximizing market share can be a
very strong influence on pricing.
Survival
Sometimes, the idea of maximization of profit market share can be a
luxury to a marketing organization whose main objective is simply to
survive and avoid going into bankruptcy. Most organization fail when
they run out of money to pay debts when they become due. In these
circumstances, prices may be set at a very low level simply to set
sufficient cash to help the organization get past its short-term problems.
Social Objective
Profit-related objectives still have very little meaning to many in nonprofit making organization. Price of some public goods represents a tax
levied by Government, based on wider considerations of the ability of
users to pay for the service and the public benefits of that service or
good. As an instrument of social policy, educational services aimed at
the disadvantaged groups are often priced at a very low price or at no
charge at all. (Adopted from Palmer & Cole).
FACTORS AFFECTING PRICING DECISIONS
The following are the factors that influence Pricing decisions:
1)
2)
3)
4)
5)
6)
7)
8)
9)
Organizational and marketing objectives
Pricing objectives
Costs
Other marketing mix variables
Channel members expectations
Buyer’s perception
Competition
Legal and regulatory issues
Perceived value for money.
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Unit 11
Introduction
Let us take a close look at these:
Organizational and Marketing Objectives
Marketer should set prices that are consistent with the organization’s
goals and mission. It is also very important that decision makers should
also make pricing decisions that are compatible with the organization’s
marketing objectives.
Pricing Objectives
Overall goals describe what a company wants to achieve through its
pricing efforts. The type of pricing objective a marketer uses will have
considerable bearing on the determination of prices. Marketers often
use multiple pricing objectives, including those that emphasize survival,
profit, return on investment, market share, cash flow, status quo or
product quality.
Costs
Obviously costs must be an issue when establishing price. A business
may temporarily sell products below cost to match the competition, to
generate cash flow or even to increase market share; but in the long run
it cannot survive by adopting this approach. Thus a marketer should be
careful to analyze all costs so that they can be included in the total
costing for a product.
Other Marketing Mix Variables
All marketing pricing decisions can influence decisions and activities
associated with product place/distribution, promotion and customer
service variables. A product’s price frequently affects the demand for
the product. A high price, for instance may result in low unit sales,
which in turn may lead to higher production costs per unit. Conversely,
lower price per unit, production costs result from a low price. For many
products, buyers associate better quality with a high price and poorer
product quality with low price.
Price of a product is linked to several dimensions of its distribution.
Premium price products are often marketed through selective or
exclusive distribution; lower-priced products in the same product
category may be sold through intensive distribution. (see unit 10)
The way a product is promoted can be affected by its price. Bargain
prices are often included in advertisements, whereas premium prices
are less likely to be mentioned.
Channel Member Expectations
When making price decisions, a producer must consider what
distribution channel members – wholesalers, retailers, dealers expect.
A channel member expects to receive a profit for the work performed.
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The amount of profit expected depends on the amount of time and
resources expended and on assessment of what would be gained by
handling a competing product instead.
Channel members expect producers to provide discounts for large
orders and quick payment. At times resellers expect producers to
provide support activities, sales promotion etc. All these cost money so
the producer must consider these costs when determining prices.
Buyer’s Perceptions
When making pricing decisions Dibb at el (opp Cit) argue that marketers
should be concerned with two vital questions.
1) How will customers interpret prices and respond to them?
Interpretation in this context refers to what the price means or
what it communicates to customers. Does the price mean “high
quality”’ or “great deal”, ‘fair price’ or rip off’?
2) How will customers respond to the price? Customer response
refers to whether the price will move customers closer to the
purchase of the product.
Competition
A marketer needs to know competitors’ prices so that a company can
adjust its own prices accordingly. This does not mean that a company
will necessarily match competitor’s price, it may set its prices above or
below theirs. It is of importance for marketers to assess how
competitions will respond to price adjustments.
PROCESS OF DETERMINING PRICES
There are seven stages that might be involved in determining prices.
Other writes have different stages but the basic considerations are the
same. For our purpose let us consider the 7 stages presented by Dibb
and her colleagues:
Stage 1 Selection of pricing objectives
Stage 2 Assessment of target market’s evaluation of price and its ability
to pay
Stage 3 Determination of demand
Stage 4 Analysis of demand cost and profit relationship
Stage 5 Consideration of competitor’s Price
Stage 6 Selection of basis for pricing.
Stage 7 Selection of pricing strategy
Determination of specific price.
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Unit 11
Introduction
Stage 1 Selection of Pricing Objectives
Marketers must set pricing objectives that are consistent with
company’s overall and marketing objectives. Inconsistent objective
cause internal conflict and confusion and can prevent the business from
achieving its overall goals.
Stage 2 Assessing the target market’s evaluation of price and ability to
buy
The degree of which price is a significant issue depends on the type of
product the type of target market and the purchase situation. The
purchase situation has a major impact. Thus visitors to tourist
attractions may be prepared to pay inflated price for a canned drink and
food, which is something they would not tolerate from their local super
market.
Action
(Try and compare prices of soft drinks from a take away at a petrol
filling station and a super market).
Assessing the target marketing’s evaluation of price helps a marketer to
judge how much emphasis to place on price. The people who make up
the market must have ability to buy a product. This ability to buy like
buyer’s evaluation of price has direct consequences for marketers.
Understanding customer’s buying power and knowing how important a
product is to them in comparison with other products help marketers
correctly assess the target market’s evaluation of price.
Stage 3 Determine demand
Determining the demand for a product is the responsibility of marketing
managers, who are aided in this task by marketing researchers and
forecasters. This issue is difficult in many companies because there is
usually an argument regarding who should set a price. Is it the
accountants or Marketing Management. For example who sets fees at
Mulungushi University? Marketing research and forecasting techniques
yield estimates of sales potential or quantity of a product that could be
sold during a specific period. Techniques such as surveys, time series
and analysis, correlation methods and market tests are very helpful
tools. The estimates are helpful in establishing the relationship
between a product’s price and the quantity of demands.
As you probably can remember from your economics module, for most
products the quantity demanded goes up as the price goes down and
goes down as the price goes up. Thus there is an inverse relationship
between price and marketing environment and buyers needs, ability,
willingness and authority to buy remain stable, this fundamental inverse
relationship will continue.
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However not all types of demand conform to the classic demand curve
(remember from your economics module). Prestige products, such as
designer jewellery, perfumes and exclusive holidays seem to sell better
at higher prices than at lower prices. These products are desirable
partly because their cost makes buyers feel superior.
Demand Fluctuations
Changes in buyers’ needs, variations in the effectiveness of other
marketing mix variables, the presence of substitute and dynamic
environmental factors can influence demand.
Gauging Price Elasticity of demand
Our discussion so far has considered how marketers identify the target
markets’ evaluation of price and its ability to purchase and how they
examine whether price is related inversely or directly to quantity sold.
The next stage in the process is to gauge elasticity of demand. Price
elasticity of demand provides a measure of the sensitivity of demand to
changes in price.
Stage 4. Analysis of Demand, Cost and Profit relationship
The previous section examined the role of demand in setting prices and
various costs and their relationships. Here we explore the relationship
between demand, costs and profits relationships:
1. Marginal analysis
2. Break even analysis
Marginal analysis considers what happens to a company’s costs and
revenues when production (or sales volume) is changed by one unit.
Both production costs and revenues must be evaluated. To determine
the costs of production, it is necessary to distinguish between several
types of cost. Fixed cost does not vary with changes in the number of
units produced or sold. The cost of renting a factory unit does not
change if an extra shift is added or more quantities are produced.
Average fixed costs per unit produced, is calculated by dividing fixed
costs by the number of units produced.
Variable costs vary directly with changes in the number of units
produced and sold. The wages for additional factory workers and the
cost of the additional material are extra.
The total cost is the sum of average fixed costs and average variable
costs multiplied by the quantity produced. The average total cost is the
sum of the average fixed cost and the average variable cost. Marginal
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Unit 11
Introduction
costs (MC) are the extra costs a company incurs when it produces one
more unit of a product.
Break Even Analysis
The point at which costs of producing a product equal the revenue
made from selling the product is the break-even point.
Stage 5: Evaluating competitor’s prices
The prices marketers set will be influenced by competitors’ pricing
strategies. Marketers are better able to establish prices when they
know the prices charged for competing brands. Learning competitors’
price is a regular function of marketing research. Some grocery and
department stores in developed economics for example have full time
comparative shoppers
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Unit summary
In this unit you have learnt

The definition of prices and the various forms of price –
rent, tuition, fares, rates, wages, commissions, tolls,
charges, subscriptions, fees, tariffs

The importance of price in developing market strategy

Organizational influences or pricing

Factors affecting pricing decisions

Stages in the process of setting prices
Summary
Assignment
No assignment
Assessment
Self Assessment Questions
1. Explain organizational influence on pricing
2. List factors affecting pricing decisions
3. Outline the process of determining prices
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Unit 12
Marketing communications
Unit 12
Marketing communications
Introduction
This unit explains that communication through promotional activities is
an essential part of the marketing mix which helps an organization to
communicate its offerings to its customers and all shakeholders
Objectives
On completion of this unit you will be able to:





Explain the communication process
Identify barriers to communication
Identify the elements of the promotional mix
Formulate promotional budgets
Design and implement, evaluate a promotional campaign
strategy
AN OVERVIEW
Organizations whether private, public or non- profit all need to
communicate with their customers.
Communication through
promotional activities is an integral and essential part of the market
mix, part of an organization’s planned drive to satisfy their customer’s
need (BPP Marketing Communication 2006).
Marketing communication might involve all communications by an
organization with environment and its various stakeholders who might
influence it not just its customers. This is a general understanding of
marketing communication but as you have learnt at the beginning of
this module marketing aims at satisfying customer needs and wants and
so let us examine the focus of communication with the customer in
mind.
Communication is at the heart of all transactions and relationships with
customers.
(a) Communication may be part of the product or service itself: for
example in the case of media, information and communication
technology (ICT) and internet markets, education training etc.
(b) Communications are central to exchange or transaction process.
They help people to buy:
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



Informing and making potential customers aware of the
organization’s offering
Persuading current and potential customers of the
desirability of entering into an exchange relationship
Reminding customers of the benefits of past transactions
with a view to encouraging repeat purchase
Differentiating between competing offerings, helping
consumers to decide which transactions to make.
(c ) Communications define and create relationships with the
customer. You will note that Relationships by and large depend
on communication and the quality of communication. It is true
in the market place as it is in our personal lives.
(BPP Marketing Comm opp cit).
HOW COMMUNICATION WORKS
As you have observed communication is used to inform, remind,
persuade and differentiate an organization’s products from those
offered by competitors. Therefore it is important that one understands
how communication works. This will be your point of departure to
developing skills and knowledge about marketing communications.
Kotler has presented a model of the communication process which can
be of help to conceptualize how communication flows.
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Unit 12
Introduction
The following is the explanation of each of the demands in the model.
Elements
Comments
Parties
-
Sender
Sends the message
-
Receiver
Receives the message
Communication Tools
-
Message
Media
Content of Communication
Communication Channels
Communication functions
-
Encoding
(words etc by sender)
Decoding
message
Response
Feedback
Meaning is given in symbolic form
Receiver translates and interprets
Receiver reacts to message
Part of the receiver’s response is
communicated back to sender
The above model as noted in marketing communication
underscores many of the factors in effective communication.
Senders need to understand the motivation of their audiences in
order to structure messages that the audience will interpret
correctly through the decoding process. The sender also has to
ascertain the most effective communication media through
which to reach the audience and must establish effective
feedback channels in order to find out the receiver’s response to
the message.
The noise that is depicted in the model refers to those factors
that prevent the decoding of a message by the receiver in the
way the sender intended.
Having seen how the basic communication process works let us
now consider specifically how promotion is used to influence
individuals, groups or organizations to accept a firm’s products or
offerings.
Product Adoption Process
Journalists and other media professionals often say their aim is
to inform, educate and entertain. The aim of marketers when
they engage in marketing communication is different. In their
case as Dibb et al (2006) observes they communicate to facilitate
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satisfying exchanges – products or services for money or
donations. One long-run purpose of promotion is to influence
and encourage buyers to accept or adopt goods, services and
ideas. You may have noticed that at times an advertisement may
be informative and entertaining yet fail to entice the audience to
purchase a product.
As Dibb et at (Opp Cit) have observed to establish realistic
expectations about what promotion can do, adoption should not
be viewed as a one-step process. Rarely can a single
promotional activity cause an individual to buy a previously
unfamiliar product; acceptance of a product involves many steps.
The product adoption process can be defined as a series of five
stages in acceptance of a product: awareness, interest,
evaluation, trial and adoption. These stages are depicted in the
following diagram:
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Unit 12
Introduction
Awareness
Comes through mass
communication:
television, magazines, radio internet
Interest
Mass communication
sources:
television, magazines, radio, internet but
not the same message as for
awareness
Evaluation
Personal sources : relatives friends
Trial
Personal sources: Sales people, relatives,
friends
Personal Sources and for reassurance,
Adoption
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mass communication
In the awareness stage, individuals become aware that the
product exists, but they have little information about it.
Consumer enters the interest stage when they are motivated to
obtain information about the product’s
features, uses,
advantages, disadvantages, price or location.
During the evaluation stage, individuals consider whether the
product will satisfy certain criteria that are crucial for meeting
their specific needs. In trial stage, they use or experience the
product for the first time, possibly by purchasing a small
quantity, by taking advantage of a free sample or demonstration
or by borrowing the product from someone.
Individuals move into the adoption stage by choosing the specific
product when they need a product of that general type.
DIFFUSION AND CATEGORIES OF ADOPTERS
Diffusion: This can be defined as the process by which an innovation is
communicated overtime among the individuals within society who
comprise the target market (BPP Marketing Communication Opp Cit).
Four key elements significant to the diffusion process;




Innovation itself
The communication process and channels used
The time at which individuals decide to adopt the product
The social system involved
At the heart of diffusion process is the decision by an individual to adopt
the innovative product or service. This process of adoption focuses on
the mental process through which an individual passes from the first
hearing about the innovation to final adoption.
People do not adopt a product at the same time. Five categories of
adopters can be identified and the description is often diagrammatically
as follows:
PROMOTIONAL TOOLS
ADVERTISING PUBLI RELATIONS SPONSORSHIP, DIRECT MARKETING
AND PERSONAL SELLING
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Unit 12
Introduction
In this unit we shall consider Advertising, Public Relations and
Sponsorship. Let us consider each in turn:
Advertising
Advertising is defined as a “paid-for form of non-personal
communication that is transmitted through mass media such as
television, radio, newspapers, magazines, direct mail, public transport
vehicles, outdoor displays and the internet.
Many people think that it is only business organizations that advertise.
However many types of organizations use advertising. This includes
Governments, Churches, Universities, Civic groups and Charities (Dibb et
al opp cit).
The uses of Advertising
The following are the uses of advertising:
1. Promoting Products and Organizations:
Advertising is used to promote goods, services, ideas, images, issues,
people etc
Advertising can be institutional or product advertising. Institutional
advertising promotes organizational image, ideas or political issues.
Institutional advertisements may deal with broad image issues, such
as organizational strengths or the friendliness of employees. They
may also aim at creating a more favorable view of the company in
the eyes of non customer groups such as stakeholders, consumer
advocacy groups etc.
Product advertising promotes goods and services. Business,
Government and private non business organization turn to product
advertising to promote uses, features images and benefits of their
products.
Stimulating Primary and Selective Demand
Primary Demand:
When a company is the first to introduce a product or innovation it
will attempt to stimulate primary demand.
Selective Demand:
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To building selective demand an advertiser turns to competitive
advertising which points out a brand’s uses, features and
advantages that benefit consumers but may not be available in
competing brands.
Off-setting Competitor’s Advertising
When marketers advertise to off-set or lessen the effects of a
competitor’s promotional programme, they are using defensive
advertising.
Making Sales Personnel More Effective
Business organizations may engage in this type of advertising to
improve the effectiveness of sales personnel. The aim of this
advertising is to pre-sell a product to buyers by informing them of its
uses, features and benefits and by encouraging them to contact
dealers or sales representatives. This form of advertising helps sales
people to find good business prospects.
Educating the Market
When a company is entering a new market or introducing new
products there will be need to orient the market through
advertising.
Increase the use of a Product
To increase the uptake of products firms engage in this type of
advertising.
Reminding and Re-enforcing Customers
Consumers from time to time may need to be reminded that an
established brand is still in the market and that it has certain uses,
characteristics and benefits. Re-enforcement tries to assure current
users that they have made the right choice.
Reducing Sales Fluctuations
This aims at addressing variations of demand from month to month
because of such factors as holidays, climate, seasons and customs.
SETTING THE ADVERTISING BUDGET
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Unit 12
Introduction
The advertising budget is the total amount of money that the
professional responsible for the marketing function allocates for
advertising over a period of time. The following methods can be used to
determine the marketing budget:
Arbitrary Approach
This is an approach were Senior Management states how much is
available for advertising for a certain time period. The manager’s
response for marketing has no choice in the matter. All you can afford
(usually the minimum). This often applies to a new company starting up
or to an existing company advertising for the first time. This conscious
decision has to be taken to forego immediate profits or to forego an
investment in another area in favour of an investment in marketing
communication. This means investing at a minimum level. This will
necessarily limit the scope of the work however and limit the results to
be achieved. (BPP Marketing Comm. Opp Cit)
Objective and Task Approach
Of the many techniques used to determine the advertising budget this is
hailed by many authorities as most logical. Employing this approach
marketers begin by determining the objectives that a campaign is to
achieve and then list the tasks needed to implement the objectives. The
costs of the tasks are calculated and added to arrive at the amount of
the total budget.
The Percent of Sales Method
The percentage of Sales approach is commonly used method used to
determine the communication budget because as explained in the
Marketing Communication referred earlier:






It is easy to calculate
It is precise
It can be quickly monitored
It can be varied in programme steps
It appears logical
It is financially safe
Competition Matching Approach
This is a budgeting technique in which marketers either match
their major competitor’s budget or allocate the same percentage
of sales for advertising as their competitors.
Historical basis
Here the managers using their experience to form their
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judgment of the effectiveness or otherwise of a particular levels
and different promotional methods. They use historical data to
determine the trends and make their decisions accordingly.
Experimental and Testing approach
This method involves selecting a set of matched markets.
Different final promotional budgets can be set for each of these
markets and the results carefully monitored.
The resulting levels of awareness and sales derived can be
compared.
Problems associate with this includes:



The cost of conducting experiments
The premature informing of competitors
The fact that markets can never be completely matched.
(Bpp Marketing Comm Opp.Cit)
Modeling and Simulation Method
Here use is made of computer databases and because of more
price promotional media it is possible to build models to forecast
the likely performance of different media schedules.
PUBLIC RELATIONS
Public Relations is defined by the institute of Public Relations as
Planned and sustained effort to establish and maintain goodwill
and mutual understanding between an organization and its
publics. Broadly, public relations is the interface of the
organization with its publics. The publics the organization needs
to interface with are all its customers, members of staff,
suppliers, the government, the local community and other
stakeholders, the media and financial publics.
In terms of corporate activities interfacing with publics, may
involve:



Publicity generating editorial coverage in the press or
technical/trade journals
Press/media relations: keeping relevantnews/information
media informed about organizational activities and
offerings, building goodwill in order to secure positive
coverage, establishing organizational spokespeople as
potential sources of information and comment.
Public affairs: Lobbying or representations to government
and trade bodies.
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Introduction



Community Relations: contributing to community
projects, community sponsorship; dialogue with
community and consumer groups.
Employee Relations, managing a range of internal
communication mechanisms.
Customer relations: Customer marketing support and
business to business communication for example
sponsorship: events and exhibitions.
Public Relations Mechanisms
Public Relations as a promotional tool uses a number of
mechanisms as follows:Consumer (marketing support)





Consumer/trade press releases
Publicity
Product placement (T.V. Cinema)
Promotional Video , CD ROM
Special events (in-stole competitive, celebrity store
openings)
Magazines or newspaper
Sales force/distributor incentive schemes
Sport, art sponsorship



Business to Business Communication





Corporate identity design
Corporate literature
Trade/general press relations
Corporate and product videos
Corporate hospitality
Corporate, external and public affairs








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Corporate literature
Community involvement
Media relations
Issues trucking/management
Local/central government lobbying
Industrial (trade/profession) lobbying
Site visits and corporate hospitality
Community (political) sponsorship
Financial Public Relations



Financial media relations
Design of annual/interim reports
Visits by analysts, broker
SPONSORSHIP
Sponsorship may be defined as the financial support of an event,
activity, person, organization.
The main types of sponsorship are broadcast or programme
sponsorship, sports sponsorship and art sponsorship.
Programme Sponsorship
An organization can sponsor a programme on TV or radio. The
sponsored programme can have both front and end credits for the
sponsor. The organization sponsoring can also be given credits at the
beginning and end of commercial breaks.
Sports Sponsorship
Major sporting events and competitions have the advantage of being
attended by large audiences and watched by millions more on T.V. They
also attract many columns of coverage in sports pages of newspapers.
Bill boards advertising the company’s products are erected throughout
the sports arena. You may have seen them at stadia where the
sponsoring organization may display bill boards. In recent years, this
has been extended to sponsoring sportswear. You may have seen
prominent teams wearing football attire carrying the message “Fly
Emirates” etc.
Event sponsorship such as sponsorship of art exhibitions is not
uncommon.
DIRECT MARKETING
As Thodore Levitt argues the main purpose of business is to create and
keep a customer. Direct marketing’s aim is to acquire and retain
customers. The institute of Direct Marketing has defined Direct
Marketing as the planned recording, analysis and tracking of customer
behavior to develop relational marketing. The Direct Marketing
Association defines direct marketing as an interactive system of
marketing which uses one or more advertising media to effect a
measurable response and/or transaction at any location.
Direct Marketing is a form of marketing where the marketing
organization does not pass through the traditional distribution channels
but rather creates and develops or direct relationship between the
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Unit 12
Introduction
marketer and the prospect, between the consumer and the
organization.
Direct Marketing involves the use of a verity of media:







Radio
Direct mail
T.V.
Direct response advertising
Telemarketing
Inserts in product packaging
Electronic media- the internet
Door to door and many more.
PERSONAL SELLING
Baron et al, Macmillan dictionary of Retailing defines Personal Selling as
“the presentation of products and associated persuasive
communication to potential clients, employed by the supplying
organization”.
The exact activities involved in the selling process vary from one sales
person to another and differ for particular selling situations. Generally
the typical process consists of seven elements as follows:
1.
2.
3.
4.
5.
Prospecting and evaluating opportunities
Preparing to contact prospects or existing customers
Approaching the prospect or existing customer
Making the presentation or sales pitch
Overcoming objections and reassuring the prospect of
customer
6. Closing the deal or transaction
7. Following up to ensure customer satisfaction and enable
repeat business.
Usually the image known by many as that of a travelling salesman or
sales representative but reality sales representative covers a broad
range of positions. The Mystique of Super Salesmanship 1961 gives us
the following classification of sales positions:
a) Deliverer, where the sales person’s job is predominantly to
deliver the product
b) Order taker where the sales person passively take orders from
the customer
c) Missionary, where the sales person is not expected or permitted
to take an order but is expected to build goodwill or educate the
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customers. Medical representatives from pharmaceutical
companies may fall into this category.
d) Technician, where the sales person’s main task is the application
of his technical knowledge relating to the product. The sales
person acts particularly as a consultant to the customer.
e) Demand creator, where the salesperson has to stimulate
demand and creatively sell tangible or intangible products.
SELLING PROCESS VARIED FROM SETTING TO SETTING
Industrial Selling
In industrial selling there tends to be few customers and markets are
concentrated. The purchasing decision making is also complex, there’s
usually need for a long term relationship between buyer and seller. The
main emphasis is on problem-solving approach. This is different from
what happens in fast moving products where the approach is
characterized by an ordertaking mentality.
Selling for Resell
Here the sale is to intermediaries who will then sell on the product in its
original form to the next level of the supply chain, such as wholesalers
supplying small independent retailers who may have no financial or
scale capacity to order from manufacturer. The manufacturer has two
main choices in terms of strategy:
1. The manufacturer may use the pull strategy, relying on
massive advertising to consumers to draw them into retail
outlets to ask for specific brands.
2. A push strategy, relying on sales people to persuade retailers
to stock and promote the product.
Selling and Exhibitions
As Lancaster & Jobbler argue, exhibitions setting are not primarily for
selling. The main purpose is to tap customer goodwill and pave the way
for future sales. This type of selling is appropriate for industrial
products. Exhibition may be considered as a way of communications
with potential customers.
Multiple Stores
These are retail organization with ten or more outlets selling the same
merchandise in identical trading format.
Department Stores
These are stores with five or more departments under one roof selling a
wide range of products e.g. Limbanda of Lusaka’s town centre.
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Unit 12
Introduction
Unit summary
Summary
Assignment
Assessment
Self Assessment Questions
1. Explain the aim of marketing communication
2. Draw and explain each element in Kotler’s communication
model
3. How can you use the model to market any product you
may think of?
4. Define (a) Advertising public relations, selling and
sponsorship
5. What options are available for setting an advertising
budget?
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Unit 13
International marketing
Introduction
This unit introduces you to international marketing. It presents with
reasons why companies extend marketing activities to the international
arena and the challenges they face.
After completing this unit you will be able to




Explain the importance of international trade
Identify the advantages of international market
Identify barriers to international trade
Explore various entry options available to a company desiring to
enter the international arena.
International Marketing (IM) refers to the marketing of goods and
services in two or more countries (BPP international marketing, 1999)
Our point of departure is to identify reasons why firms decide to enter
the international market. Here are the reasons for engaging in
international marketing;
(a) A firm might want to extend the product life cycle.
(b) Where there is intense competition in the home market, a firm
might want to escape to less competitive markets
(c) The domestic market offer low growth prospects.
(d) The domestic market might offer low growth risk. (BPP
international marketing1999)
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Unit 13
International marketing
Here are more reasons why companies expand their markets into the
international arena:
-
-
To increase overall levels of profit
The home market might be saturated
With the freeing up of trade, this has meant that foreign
competition exist in the home market, so to counteract
this there is the equivalent need to enter foreign market.
To obtain economies of scale operations
The reasons for international market are not exhaustive. (Try to stretch
your imagination to identify more reasons).
International Marketing presupposes international trade. There are a
number of advantages of international trade.
(a) Enables countries to specialize. This means a country normally
exports goods which it can produce most efficiently, that is at
least cost relative to other countries, it normally imports goods
in which other countries are relatively more efficient. This is
called the principle of comparative advantage.
(b) Increase competition and possibly efficiency of production; and
creates larger markets with the potential for economies of scale
introduction (BPP publishing 1999);
At least five levels of involvement in international marketing can be
identified.
(a) Domestic market – marketing activities directed exclusively in
the organizations home market
(b) International Marketing – marketing activities in which a
business reduces reliance on intermediaries and establishes
direct involvement in the countries in which trade takes place.
(c) Multinational Marketing – Adaptation of some of a company’s
marketing activities to local culture and differences in taste.
(d) Global Marketing – A total commitment to international
marketing, in which a company applies its assets, experience and
products to develop and maintain marketing strategies on
global scale.
Barriers to International Trade
Although international trade is desirable for all countries of the world as
we have observed, some countries engage in protectionism. This is the
discouraging of imports by raising tariff barriers, imposing quotes etc in
order to protect local products. Countries also raise barriers to trade for
political or economic reasons.
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We identify the various forms of protectionist measures available to
Governments,. These measures constitute barriers to international
trade and so they affect firms that are involved in international
marketing: tariffs or custom duties, non tariff barriers, import quotes
and embargoes and exchange control.
Tariffs or custom duties
The importer is required to pay either a percentage of the value of the
imported goods, (this form of tariff is also known as advalorem duty) or
duty is paid per unit of the goods imported and this type of duty is
known as specific duty.
Non tariff barriers to trade
Import quotas – these are restrictions on the quantity of product
allowed to be imported into the country;
The restriction can be imposed by granting the right to import only to
certain producer.
Anti dumping action
Dumping is the sale of a product in other countries at a price lower than
charged in the domestic markets. Antidumping action would include
quotas, minimum price or extra exercise duty.
Embargoes
An embargo on imports from one particular country is a total ban.
Usually an embargo has political motive. For example US maintain an
embargo on trade with Cuba. Before the removal of apartheid in South
Africa, Zambia maintained an embargo on trade with South Africa.
Subsidies
When a country subsides it industries has the effect of lowering costs
and foreign a competitor is disadvantaged by this.
Exchange Control
This is a situation where foreign supplier may not be able to repriate
money it earns in a foreign country. This is because their is control on
what can be sent abroad in foreign exchange.
ALTERNATIVE ENTRY STRATEGIES
The level of commitment to international marketing is a major variable
in deciding what involvement is appropriate. An organization’s market
entry options range from exporting to expanding overall production and
marketing into other countries. Dibb et al (opp cit). This section
examines exporting, licensing, franchising, contract manufacturing, joint
ventures, trading companies, foreign direct investment and other
approaches to international involvement.
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Unit 13
International marketing
Exporting
Exporting is the lowest involvement and most flexible level of
commitment to international marketing. A business may find an
exporting intermediary that can perform most marketing functions
associated with selling to other countries. This approach entails
minimum effort and cost. Modifications in packaging, labelling, style or
colour may be the major expenses in adapting a product. There is
limited risk in using export agents and merchants because there is no
direct investment in the foreign country.
Licensing
When potential markets are found across national boundaries and when
technological assistance or marketing know how is required licensing is
an alternative to direct investment. The licensee (the owner of the
foreign operation) pays commission or royalties on sales. An initial fee
may be charged when the licensing agreement is signed. Exchange of
management techniques or technical assistance is the primary reasons
for licensing agreements. The coca-cola company of USA has a licensing
agreement with South Africa Breweries to produce fanta, coca-cola and
other beverages in Zambia.
Licensing is an alternative to direct investment when the political
stability of the foreign country is in doubt or when resources are
unavailable for direct investment.
Franchising
Another alternative to direct investment in non domestic markets is
franchising. This form of licensing which grants the right to use certain
intellectual property rights, such as the trade names, brand names,
designs, patents and copyrights, is becoming increasingly popular.
Under this arrangement the franchisee pays to be allowed to carry out
business under the name owned by the franchiser. The franchiser
retains control over the manner in which the business is conducted and
assist the franchisee in running the business. The franchiser retains
ownership of his/her business, which remains separate from that of the
franchisee.
Contract Manufacturing is a practice of hiring a foreign company to
produce a designated volume of the domestic company’s product to a
set specification. The final product carries the domestic company’s
name. In recent years some products by Unilever have been
manufactured under contract manufacturing.
Joint Venture and Strategic Alliances
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In international marketing, a joint venture is an agreement between a
domestic company and a foreign company or government. Joint
ventures are especially popular in industries that call for large
investments, such as natural resources extraction or car manufacturing.
Control of the joint venture can be split equally or can be retained by
one party. Joint ventures are often necessary where entry into a market
is difficult because of political reasons or because of nationalism and
government restrictions on foreign ownership. For example companies
such as Ford Motors have entered the Japanese market under such an
arrangement. Here Zambia-China Mulungushi Textiles joint venture
limited is one example such business arrangement.
Strategic Alliances
This market form of international business structure is partnership
formed to create a competitive advantage on a worldwide bases. It is
very similar to joint ventures. Strategic alliances have been defined as
co-operation between two or more industrial corporations, belonging to
different countries, whereby each partner seeks to add to its
competencies by combining its resources with those of its partners.
The partners forming international strategic alliances share common
goals yet often retain their distinct identities, each bringing a distinctive
competence to the union. Usually in this kind of business structure
alliances are between companies that have been traditional rivals
competing for market share.
Trading Company
Provides a link between buyers and sellers in different countries. As its
name implies a trading company is not involved in manufacturing or
owning assets related to manufacturing. The trading company buys in
one country at the lowest price consistent with quality and sells in
another country. An important function of trading company is taking
title to products and undertaking all the activities necessary to move the
products from the domestic country to a foreign country, large, grain
trading companies, for example, control a major portion of the world’s
trade in basic food commodities.
Foreign Direct Investment
Foreign direct investment (FDI) involves making a long term
commitment to marketing in a foreign nation through direct ownership
of a foreign subsidiary or division.
Regional Trading Groups
Types of trading groups
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Unit 13
International marketing
Currently, a number of regional trading arrangements exist, as well as
global trading arrangements. These trading groups take three forms:
(a) Free trade areas
(b) Customs Unions
(c) Common Markets
Free trade area
Members in these arrangements agree to lower barriers to trade among
themselves. They enable free movement of goods and services, but not
always the factors of production.
Custom Union
Custom Unions provide the advantages of free trade areas and agree on
common policy on tariff and non tariff barriers to external countries.
Internally they attempt to harmonies tariffs, taxes and duties amongst
themselves.
Economic Unions/Common Markets
In effect the members become one for economic purposes. There is
free movement of the factors of production. The EU has economic as
and aim. The EU has a rich market of over 300 million people and could
provide a counter weight to a country like USA. (BPP Publishing 1999)
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Unit summary
In this unit you have learnt the following:
Summary

What is meant by International marketing (IM)

Reasons for first entering the International arena

The theory of comparative advantage in the context of
International marketing

Barriers to International trade

Alternative entry option into the International market.
Assignment
No assignment
Assessment
Self Assessment Questions
1. Explain the reasons why companies enter the international
market
2. Explain the advantages of international marketing
3. Identify barriers to international marketing
4. Identify various entry option into International marketing
5. Identify barriers to international marketing
6. Identify types of trading groups
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